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TMI Blog2016 (9) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA 3021/Mum/2012 for A.Y. 2008-09. The only issue raised in the grounds of appeal by the assessee is against the confirmation of the addition of Rs. 85,72,459/- as made by the AO under the head "Agency Commission". 3. The brief facts of the case are that the assessee was engaged in the business of marketing and export of readymade garments. The assessee filed its return of income for A.Y. 2008-09 on 27.09.2008 declaring total income of Rs. 3,11,04,750/- which was processed u/s. 143(1) of the I.T.Act, 1961. Thereafter, a revised return was filed on 12.02.2010. The case was selected for scrutiny under CASS and notice was served u/s. 143(2) of the Act. A questionnaire along with notice u/s. 142(1) of the Act was also served on the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r additions thereby assessing the income at Rs. 4,08,60,150/-. On appeal, the learned CIT(A) confirmed the additions made by the AO for the reasons mentioned in para 3.3 of the appeal order. 4. The learned AR submitted before us that the case of the assessee is fully covered by the order, dated 19th January 2011, of the Tribunal in the assessee's own case in ITA No. 3782/Mum/08 for A.Y. 2005-06 and another decision of the co-ordinate Bench in the case of Harrison Garment Division in ITA No. 3022/Mum/2012 and ITA 6480/Mum/2012 vide order dated 30.04.2014, which is a sister concern of the assessee. The learned AR further submitted that the foreign commission agents were same in the case of the assessee as well as in the case of the sis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written agreement tax liability cannot be fastened to the assessee for the first time. It is a normal practice of business world that agreements are entered into, outlining rights and duties of both the parties, while deciding to carry out a specific job like doing agency work for the other party. But, it is also not uncommon that without a formal and written agreement parties decide to do job and pay/receive commission. In these circumstances, no fix formula can be devised or held to be applicable as far as payment of brokerage/commission is concerned. It is basically a business decision. Though the written agreement are considered more reliable evidenced in allowing commission payment, but no assessee can claim that because of a written a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration it is found that the assessee had incurred negligible expenditure under the head foreign travel, though it is mainly in the business of export. It is also found that it does not have office out of India. It is getting order from its agent and payment is routed through proper banking channels. From the records it is clear that profit of the assessee is also increasing. Correspondence of the foreign agent clearly show that the assessee is engaged in the business of exporting goods and is making payments to the agent regularly. It cannot be denied that here was a longstanding relationship between assessee and selling agent, one of the main ingredient for allowing /disallowing commission payment. We find that in the case of the sister c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and business income for this year vis-à-vis earlier year, it can be noticed that the export sales in this year increased from Rs. 8.06 crores to Rs. 11.15 crores. Despite the payment of commission at l0% to a person, who is unrelated to the assessee, the gross profit as well as the net profit of the assessee saw substantial increase in terms of amount as well as percentage. The fact that the assessee did pay commission to its foreign agent has been acknowledged by the AO as is apparent from his decision in restricting the deduction to 2.88% of the turnover. Once the commission is accepted to have been paid, there is no logic in disallowing such expenditure by holding that it was excessive. It is for the assessee to determine the wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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