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2016 (1) TMI 785 - MADRAS HIGH COURT

2016 (1) TMI 785 - MADRAS HIGH COURT - TMI - Entitlement to the benefit of commission, purportedly paid by the assessee to its commission agents - Held that:- Having considered the value and utility of the PAN, viz-a-viz, the power of the Income-Tax Authorities, it may not be difficult for the Income Tax Department to track the transactions of the Commission Agents.

Considering the scope of submissions made on both sides and also considering the scope of enquiries that can be made uti .....

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nt : Mr. P Senthil Kumar JUDGMENT ( Judgment of the Court was delivered by S. Vimala, J. ) This Tax Case Appeal has been filed by the Revenue, as against the order of the Income Tax Appellate Tribunal, 'C' Bench, Chennai, dated 24.08.2007, made in I.T.A.No.740/Mds/2007. Brief facts:- 2. The assessee is a business concern dealing in chemicals. In respect of the assessment year 2003-2004, return of income was filed by the Assessee disclosing taxable income of ₹ 26,57,330/- while clai .....

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essing Officer, on enquiry, found that the business concerns belonging to Auto India Group were not traceable and in the absence of details, such as, details of services rendered, identification of persons, who rendered such services and the justification for the expenditure, it is difficult to come to a conclusion that the expenditure is wholly and exclusively could have been incurred for the purpose of business and hence, disallowed the claim for deduction on account of payment of commission. .....

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Commission paid to the corporate entities, through banking channel, whose Permanent Account Numbers (PANs) have been furnished to the Assessing Officer cannot be doubted and disallowed without proper enquiries. Aggrieved over this order, the Department has preferred this Appeal, raising the following substantial question of law:- "Whether on the facts and in the cricumstances of the case, the Income Tax Appellate Tribunal was right in law in justifying the commission paid to the tune of  .....

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r computation of profits and deduction of expenditures in certain cases. Section 37 of the Act provides for the deduction of all expenditures, wholly and exclusively laid out or expended for the purpose of business, where such expenditure is not expressly covered by any other specific provisions of the Act. The guidelines for deduction of an expenditure has been furnished in the decision of the Kerala High Court reported in the case of Ram Bahadur Thakur Ltd. v. CIT (2003) 261 ITR 390 (Ker.) (FB .....

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ssessee, (5) it should have been laid out or expended wholly and exclusively for the purpose of such business and (6) it should not be in the nature of capital expenditure." 4. It is the contention of the learned counsel for the Assessee / respondent that the assessee met with business expenditure to the extent of ₹ 67,27,747/- towards payment of commission of which it is entitled to deduction, as per the provisions of Section 37 of the Act. But the contention of the Revenue is that, .....

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nd (c) O.P.Steels Limited. In respect of these claims, while confirming the disallowance ordered by the Assessing Officer, the Commissioner of Income Tax held that the primary onus of proving a transaction squarely lies on the person claiming the same and as the Assessee has not discharged the primary onus of proving the transaction, the Assessing Officer was right in disallowing the deduction claimed. On the contrary, the Income Tax Appellate Tribunal, considering the following facts and circum .....

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ase of K.P.Varghese v. Income Tax Officer, Ernakulam and another, 131 ITR 597 (SC). 6.2. This finding of the Income Tax Appellate Tribunal is under challenge, by the Revenue. 7. Supporting the findings of Income Tax Appellate Tribunal, the learned counsel for the Assessee relied upon the decision of the decision of the Hon'ble Apex Court reported in 159 ITR 78 (CIT v. Orissa Corporation Limited), whereunder it has been held as follows:- "In this case the assessee had given the names and .....

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e to pursue the so called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence." 7.1. Yet another contention of the assessee is with reference to the finding regarding the reasonableness of the expenditure. Contending that, in applying the test of .....

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aken all possible steps to find out the whereabouts of the concern, to whom, the commission has been allegedly paid and those concerns were not in existence and when this fact was not disputed by the assessee itself, nothing is left for the Revenue to disprove the case of the assessee and therefore, the order of the Income Tax Appellate Tribunal has to be set-aside. 9. Contending that the materials placed by the Assessee would not exonerate the assessee from onus of proof and even in cases where .....

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nce of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission .....

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mission made is not praise-worthy; however, when there are documents produced in respect of the claim made, in this case, prior conduct cannot be the ground to disallow the claim of the assessee. 10.2. It is not a case where there is total lack of documents. The assessee has produced the agreement between the assessee and its Commission Agents, the Books of Accounts, Permanent Account Numbers (PANs) of the Agents, Bank Statements and the Credit Note pertaining to those agents. Even after the pro .....

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he powers of the Income-Tax Authorities are as follows:- Powers of the Income-Tax authorities.- For the purpose of enabling the Assessing Officer, Deputy Commissioner (Appeals), Deputy Commissioner, Commissioner (Appeals) and Chief Commissioner or Commissioner to discharge their functions so as to arrive at the correct income or loss of an assessee it has been enacted in Section 131 (1) of the Act that all those officers shall have the same powers as are vested in a civil court in respect of- (a .....

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