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2016 (2) TMI 431 - ITAT MUMBAI

2016 (2) TMI 431 - ITAT MUMBAI - TMI - Commission payment - whether the commission to be accepted to have been incurred for business purposes? - Held that:- Mere making a claim is not sufficient-it has to backed by documents and evidences. The assessee has failed in discharging the onus cast upon it by the provisions of the Act. Hon'ble jurisdictional High Court, in the matter of Ramanand Sagar (2002 (2) TMI 52 - BOMBAY High Court ), has held that Section 37 of the Act deals with the question re .....

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se of business or profession, that if the assessee fails to satisfy any of these tests, the expenditure claimed is not allowable. In our opinion, in the case under consideration the assessee has failed to discharge the initial onus to prove that the expenditure incurred under the heads rendering of services by ALT. Mere payment of a sum by accounting paying cheque is not sufficient.

If we consider all the surrounding circumstances it becomes clear that the commission payment to ALT ca .....

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sent appeal. During the course of hearing before us, an application for adjourning the case was filed. But no one, authorised by the assessee, appeared before us. Here, we would also like to mention that matter was adjourned in June 2013, January 2014, December 2014, March 2015, October 2015, December 2015 at the request of the assessee. It is also found that in June, 2015 the case had to be adjourned as none appeared on behalf of the assessee. In the letters dated 26. 6. 2013, 20. 1. 2014, 12. .....

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r on, a revised return of income was filed by the assessee on 15. 3. 2007 declaring book profit at ₹ 33. 35 crores. The Assessing Officer (AO), completed the assessment on 18. 12. 2007 assessing the income of the assessee at ₹ 20. 37 crores and book profit at ₹ 56. 61crores. On receipt of an intimation from ITO-3(1)-1, Mumbai the assessment was re-opened, as per the provisions of Section 147 of the Act. After recording the reasons for re-opening the assessment, the AO completed .....

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furnish evidence for rendering of services for earning commission from the assessee, that ITO-3(1)-1, Mumbai, had issued notices u/s. 136 of the Act to IDBI bank, that the bank informed the tax authorities that no consultant/any other person other than the employees of the company was involved in the disbursement of loan. The AO directed the assessee to furnish details with regard to nature of transaction entered into with ATL for the period 1. 4. 2004 to 31. 4. 2005 and the postal address of AT .....

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ed copies of invoices only, that the invoices did not prove that the substantive services had been rendered by ATL, that the assessee had made general submissions without any documentary evidences, that furnishing of the copies of sanction letter did not justify the payment of commission, that the assessee itself had admitted that ATL was not authorised by bank for rendering the services such as arrangement of loans. Vide order sheet noting 16. 11. 2010, the AO directed the assessee to produce A .....

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the assessee or the ex-director of the company had not furnished the details of services rendered chronologically by ATL to justify the claim of commission payment, that all the paper work and follow up had been done by the assessee in respect of the said loans, that no supporting evidence in respect of services rendered by ATL was filed, that ATL had arranged loans only for the assessee and that also for the year under consideration only, that there was no agreement between the assessee and ATL .....

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lso referred to the cases of L. H Sugar Factory and Oil Mills (P) Ltd. (125 ITR 293), Chandravilas Hotel (164 ITR 102), Calcutta Agency Ltd. (19 ITR 191), Transport Corporation of India Ltd. (256 ITR 701) and Imperial Chemical Industries(I) Pvt. Ltd. (74 ITR 17). The AO disallowed the commission payment amounting to ₹ 35 lacs u/s. 37(1) of the Act. 4. Aggrieved by the order of the AO the assessee preferred an appeal before the FAA. After considering the submission of the assessee and the a .....

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e assessee had emphasized the services rendered by K. C. Sethi an ex-director of ALT to arrange the loan, that it was not clear as to why an ex-director of ALT would help the assessee in personal capacity and issue the invoices of ALT so that assessee could claim the expenditure, that the process by which the assessee had approached ALT/K. C. Sethi was not on record, that nothing was available on record to prove that assessee had issued an advertisement for appointment of agent, that the assesse .....

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ve perused the material before us. We find that the assessee had claimed incurring of expenditure of ₹ 35. 00 lacs under the head commission payment, that it had claimed that ALT through its ex-director had arranged loan from IDBI and HSBC, that AO had made enquiries about services rendered by ALT for the said payment, that the assessee did not produce chronology of events which could firmly establish the genuineness of the transaction, that the FAA confirmed the order of the AO and upheld .....

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It is also strange that a retired person hands over the money to his ex-employer instead of taking it to home for the so called loan disbursement that was result of his personal relations. The assessee has simply said that loan was arranged, but, it has not produced any reliable documentary evidence in its favour. 5. 2. As per the established principles of taxation jurisprudence onus is always on the assessee to prove that expenditure was incurred wholly and exclusively for the purposes of busi .....

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s expenditure. For claiming a deduction u/s. 37of the Act, the assessee has to produce evidence that expenditure was incurred wholly and exclusively for the purpose of carrying on business. Wholly and exclusively, the two adverbs used in the section 37 of the Act, signify quantum of expenditure and the motive /object/ purpose of the expenditure respectively. Neither before the AO nor before the FAA the appellant had produced any evidence establishing the facts that the said expenditure was direc .....

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