New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (9) TMI 112 - CALCUTTA HIGH COURT

2016 (9) TMI 112 - CALCUTTA HIGH COURT - TMI - Allowability of expenditure - business expenditure of payment of commission to its agents of marketing and related services - Held that:- It is not in dispute, pursuant to notice issued by the Assessing Officer, both the agents confirmed in writing that they had rendered services to the assessee. The assessee has, before making payment, deducted tax at source. - The Consolidated Construction Co. [Agencies] Pvt. Ltd. in its letter dated 15th Febr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f commission earned by them had been indicated in their books of account and had also been offered for taxation and assessment was made which was also disclosed by them. The other agent namely, SPS Metal Cast and Alloys Ltd. by its letter dated 22nd March, 2006 furnished to the Assistant Commissioner of Income Tax, a copy of the extract of the ledger from its books of account disclosing the dealings and transactions between the assessee and the aforesaid agent and the copies of their balance she .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

challenge in the appeal is a judgment and order dated 17th April, 2009 passed by the learned Income Tax Appellate Tribunal, B Bench, Kolkata in ITA No. 159/Kol/07 pertaining to the assessment year 2003-04 by which the learned Tribunal dismissed the appeal preferred by the assessee. The assessee has once again come up in appeal. The question of law formulated on 14th January, 2010 reads as follows:- Whether the learned Tribunal has lawfully rejected the relevant and material evidence on its recor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d to M/s. SPS Metal Cast &Alloys Ltd. were disallowed on the following grounds:- a. The important condition to be satisfied in respect of commission transaction is rendering of service and such condition i.e. rendering of service is not established in this case. b. The parties to whom sale on behalf of the assessee is claimed to have been effected by M/s. Consolidated Construction Co. (Agencies) Pvt. Ltd. and M/s. SPS Metals Cast & Alloys Ltd are Government Undertakings who purchase the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sums had not been established by the assessee. The learned Tribunal in paragraphs 14 and 16 of its judgment has tabulated the documentary evidence adduced by the assessee and in paragraphs 17 and 18 of its judgment has recorded the inference drawn by it. It will be proper to notice the aforesaid paragraphs in extenso which are as follows:- 14. In support of the claim that the agents rendered services as per the above agreement, the assessee has relied on the following documents :- (i) Accounts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Hyderabad. (v) Agent s letter dtd. 30.09.02 regarding receipt of two cheques from the Superintending Engineer, Southern Power Distribution Co. of A.P.Ltd., Vijayawada for ₹ 37,83,091/- and ₹ 5,87,589/- respectively. (vi) Agent s letter dtd. 28-09-02 regarding receipt of cheque no.640574 dtd. 25.09.02 for ₹ 3,52, 44,403/- from EPDCL, Visakhapatnam. (vii) Agent s letters dtd. 20-09-02, 19-08-02, 29-06-02 and 19-6-02 regarding the intimation to the assessee that inspection for s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing Ltd./their authorized representative M/s. SPS Metal Cast & Alloys Ltd. should visit their office. (iii) Letter of Agent, M/s.SPS Metal Cast & Alloys Ltd. dtd. 20-10-01 to M/s. Siemens Metering Ltd. intimating the assessee that purchase order no.131/TD/06 dt. 19-1-01 issued by the Executive Director (Material), CESC Ltd. for supply of 1,00,000 nos. CM Meters @ ₹ 1,000/- is being enclosed together with the said purchase order dt.19/10/01 for ₹ 11,94,80,000/-. (iv) Letter of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e order no.27/TD/06 dt.25-03-03 for supply of 40,000 nos. single phase type CM-143 Meters @ ₹ 900/- is being enclosed together with such purchase order for ₹ 4,30,12,800/-. (vii) Confirmation letter of sale dtd.27-03-03 of M/s.Siemens Metering Ltd. to M/s.CESC Ltd for the supply of 40,000 nos. of single phase meter valued at ₹ 3,60,00,000/-. (viii) Letters dtd.10-01-02 & 21-02-03 of M/s.CESC Ltd. to M/s.Siemens Metering Ltd. regarding collection of purchase order from their .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. The evidences on which reliance has been placed by the assessee are merely correspondences between the assessee and the said agents. No independent evidence has been filed to show that the agents indeed carried on the work as evidenced/envisaged in the agreement entered into by the assessee with the said agents. The Principal Officer of M/s. Consolidated Construction Co.(Agencies) Pvt Ltd. in his statement before the AO has clearly stated that the company has not made any correspondence with t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

record any evidence to show that M/s.Consolidated Construction Co.(Agencies) P.Ltd. indeed rendered any service as envisaged in the said agreement. Thus, we uphold the disallowance of commission payment of ₹ 1,15,12,259/- made to the said party. Thus, ground no.1(a) of the assessee is rejected. 18. As regards the agent, M/s. SPS Metal Cast & Alloys Ltd., it is noticed that as per the said agreement the commission was payable @ 15% on ex-factory value of sale. It is also noticed that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aid party indeed rendered services to the assessee as per the agreement. The assessee has not brought any independent evidence to substantiate its claim that the said agent rendered services as required by the said agreement. The assessee also did not produce the Principal Officer of the agent company. In the above circumstances, we are of the considered opinion that the assessee has failed to show that indeed the said party rendered services as per the said agreement entered into with the asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee was adduced. The revenue did not bring any evidence to show that the agents appointed by the assessee did not render any service or that the payment was collusive. It is as a matter of fact, he contended, not the finding that the payment was collusive or not genuine. The learned Tribunal has tabulated the evidence adduced by the assessee but has drawn an inference which is contrary to common sense and is also opposed to business expediency. He relied upon a judgment of the Apex Court in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tutory provision to the contrary. But, in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, of universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs absolute certainty is a myth, and - as Prof.Brett felicitously puts it - all exactness is a fake . El Dorado of absolute proof be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iple having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered - to use the words of Lord Mansfield in Blatch v. Archer - according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted . Since it is exceedingly difficult, if not absolutely impossible, for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

estions of fact have been answered by all the three statutory authorities in the negative. The finding has now become final. He added that it is not the case of the assessee that any piece of evidence adduced by him has not been considered by them. He submitted that it cannot be said that the view taken by the assessing officer or the CIT(A) or the learned Tribunal is perverse. Therefore, the question even after it is reformulated, as suggested by Mr.Khaitan, has to be answered in the negative. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

CESC by its letter dated 18th October, 2001 agreed to deal with the aforesaid agent of the assessee. The agent by its letters dated 20th October, 2002 and 25th March, 2003 forwarded the purchase orders collected from CESC. The assessee by its letter dated 27th March, 2003 confirmed acceptance of the order collected by the agent for 40000 meters. The letter dated 3rd August, 2002 addressed by the agent to the assessee goes to show that the former was taking steps to have the goods inspected. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ences on which reliance has been placed by the assessee are merely correspondences between the assessee and the said agents. No independent evidence has been filed to show that the agents indeed carried on the work as evidenced/envisaged in the agreement entered into by the assessee with the said agents. The documentary evidence, adduced by the assessee, discussed above could not have been dismissed by saying that they were mere correspondences. They were correspondences with respect to the vari .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

submitted with some justification that the aforesaid impression is purely based on presumption, and not on the basis of any evidence. He added that Court can take judicial notice of the fact that CESC Limited is not a government undertaking. It is this incorrect impression, it was rightly contended, which has influenced the judgement of all the statutory authorities. They have also discarded the contents of the documents, which throw light on the services rendered by the agents appointed by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

were appointed marketing agent of the assessee. They have also disclosed extract of their books of account in order to show the dealings and transactions between the assessee and the aforesaid agent. They have also disclosed their PAN card number. By their letter dated 20th March, 2006 they once again wrote to the Assistant Commissioner of Income Tax furnishing various information including that the amount of commission earned by them had been indicated in their books of account and had also be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sed by the assessee we are inclined to think that the assessee had adduced such proof as it was in its power to prove. It is at this juncture that the judgement relied upon by Mr. Khaitan in the case of Collector of Customs, Madras and Others [supra] becomes relevant. It goes without saying that it was in the power of the revenue to have contradicted the evidence adduced by the assessee and its agents to the extent that the income earned by them on account of commission paid by the assessee was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that these facts were not contradicted because they were factually undeniable. Our attention was not drawn to any suggestion, far less any finding at any stage to show that it was even remotely suggested that the payment was collusive or the same was not genuine. From the contracts of agency the following amongst other terms and conditions appear to have been agreed to between the assessee and Consolidated Construction Co. (Agencies) Pvt. Ltd. You shall be responsible to us for realisation of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Ltd. You shall guarantee and be fully responsible to us all times for realisation of al sales proceeds and fulfilment of all contractual obligations by the buyers. This guarantee is the essence of the contract and your liabilities hereunder shall extend to all orders in respect of which you are entitled to claim commission. Our records shall be final and binding in this respect. If any State or Central Sales Tax (or any other impost) is chargeable on the sale of the products, you shall recover t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, it did not occur to them when they held that no evidence has been brought on record…….. to show that any services were rendered by the said agents to the assessee. Del credere agent has been defined in Black s Law Dictionary, 9th Edition as follows:- An agent who guarantees the solvency of the third party with whom the agent makes a contract for the principal. A del credere agent receives possession of the principal s goods for purposes of sale and guarantees that anyone to whom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in our view by a judgement of the House of Lords in the case of Edwards - Vs- Bairstow reported in 1955(3) ALL.E.L.R 48 wherein the following view was taken:- …….it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. We are also supported in our view by a judgement of the Apex Court in the case of Omar Salay Moham .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version