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M/s. Bajaj International P. Ltd. Versus DCIT, Circle 3 (1) , Mumbai

2016 (12) TMI 114 - ITAT MUMBAI

Disallowance of Commission paid in respect of exports to Iraq - Held that:- It is not Revenue’s case that no services have been rendered to the assessee by the agent. Further, nothing has been brought on record by Revenue to show that the transactions relating to the payment of commission by the assessee are either non genuine or are excessive or unreasonable. The Volcker Committee Report, cited by Revenue, had discussed about the utilization of money by the recipient of the commission in paying .....

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y on the basis of an unestablished doubt that expenditure incurred could be for infraction of law. - Decided in favour of assessee - ITA No.6837/Mum/2008, ITA No.1753/Mum/2009 - Dated:- 30-11-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain , Judicial Member For The Appellant : Ms. Vasantiben Patel For The Respondent : Shri Rajat Mittal ORDER Per Jason P. Boaz, A.M. These appeals by the assessee are directed against the orders of the CIT(A)-XXVII, Mumbai dated 30.12.2008 for .....

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as processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 28.02.2006 wherein the total income was determined at ₹ 97,42,780/-. Proceedings for reassessment were initiated under section 147 of the Act and after recording reasons for belief in respect of the assessee s income which had escaped assessment on account of illegal payments of commi .....

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ed CIT(A)-XXVII, Mumbai vide the impugned order dated 30.12.2008 allowed the assessee partial relief. For A.Y. 2005-06, the assessee filed its return of income on 31.10.2005 declaring income of ₹ 83,84,740/-. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 31.10.2007, wherein the income of the assessee was determined at ₹ 1,21,29,337/-, in view of the disallowance of ₹ 37,44,597/- which the AO held to be illeg .....

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law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Deputy Commissioner of Income-tax in re-opening the assessment under section 148. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Deputy Commissioner of Income-tax in disallowing an amount of ₹ 2,33,389/- out of commission paid in respect of exports made to Iraq. 3.2 Assessment Year - 2005-06 1. On the facts and i .....

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owance of ₹ 2,33,389/- and ₹ 37,44,597/- for assessment year s 2003-04 and 2005-06 respectively out of commission paid in respect of exports made to Iraq. At the outset of the hearing before us, the learned A.R. of the assessee submitted that this issue has been dealt with and held in favour of the assessee and against the Revenue by a Coordinate Bench of the Tribunal in the case of Metro Exporters Pvt. Ltd. in ITA No. 2026/Mum/2008 for A.Y. 2002-03 vide order dated 08.06.2016, follo .....

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heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. The facts of the matter as emanate from the record are that in both these concerned assessment years 2003-04 and 2005-06, the assessee company exported goods to Iraq under the UNO Oil for Food Scheme and in this connection had paid commission to its agent M/s. Winter International Ltd., Jordan for providing services to them and realization of export proceeds such .....

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nies to the Iraqi government in pursuance of the Oil for Food Programme , in various nomenclatures like inland transportation fee, loading fee, commission, etc., held that the commissions paid by the assessee to its agent Winter International Ltd. were actually nothing but illicit payments to the Iraqi Government. In our considered view, based on the facts on record, we find that the commission payments made by the assessee to its agent M/s. Winter International Ltd., Jordan were for services th .....

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aying of such commission so received to the Government of Iraq illicitly, which was objected to by the Volcker Committee. From a casual perusal of the details on record and in the orders of the authorities below it has not been proved that the assessee company was involved in illicit payments of commission to the Iraqi Government. Therefore it cannot be concluded that commission payments were not made for the purpose of assessee s business. Explanation to section 37 of the Act cannot be invoked .....

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ts Ltd. (152 ITD 634) has decided this issue in favour of the assessee holding as under at paras 7 and 8 thereof, as under: - 7. Ground No.5 raised in the present appeal is in respect of commission of export to Iraq. AR of assessee argued that this ground of appeal is also covered in favour of assessee by the order Hon ble Calcutta High Court in CIT vs. Rajrani Export (AIT 2013-75- High Court) and Co-ordinate Bench of ITAT, Mumbai in NSIL Exports Ltd. vs. DCIT [2014] 44.taxman.com. 246, and Air .....

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tta High Court while dealing with the Grounds of appeal raised by Revenue held as under: The commission on export activity had been fully disclosed in all correspondences and an activity in relation to export, the commission was paid through banking channel of RBI approval and it was paid pursuant to an agreement approved by Government of India and UN. The payment of commission was for business consideration and there was apparently no illegality in making payment of commission. Besides this, no .....

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rein, as it appears, neither the appellant company is involved nor Government of India is involved. Further, the Co-ordinate Bench of ITAT in NSIL Export Ltd. Vs. DCIT [2014] 44.taxmann.com 246- Mum while dealing with similar Ground of appeal held as under: Therefore, until and unless it is otherwise proved that the payment was an illicit payment to the Saddam Hussain regime and not to the parties it cannot be concluded that the said payments are not made for the purpose of business of the asses .....

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connected to the Iraqi authorities. Therefore, in the absence of specific finding that the payments were made to the Iraqi Authorities, it cannot be held as illegal payment infraction of law. Even if the assessee fail to prove beyond doubt that the payments in question inconsonance to the service rendered by the agent the same cannot be held as illegal in the absence of any evidence to prove that the assessee intended to pay the amount illegally through agent. Similar view was taken by Co-ordin .....

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d. (supra) holding that, Cipla was involved in illicit payment made to Iraq Government as per Volker Committee Report holding as under: 35. It is seen that the revenue authorities as well as the DR placed heavy reliance on the decision of Cipla Ltd. vs. ACIT, ITA No. 7284 to 7286/Mum/2007, wherein the coordinate Bench at Mumbai, came to the conclusion that, Cipla was involved in illicit payment made to Iraq Government, as per Volcker Report. It has been held by the coordinate Bench in Para 7.1 t .....

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