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2017 (1) TMI 510 - ITAT AHMEDABAD

2017 (1) TMI 510 - ITAT AHMEDABAD - TMI - Allowability of commission payment - proof that the services rendered to the assessee by the payees - Held that:- There is no dispute that the assessee has actually made the impugned commission payments after deducting TDS thereupon at the prescribed rates in furtherance to various agreements with its payees for marketing and other alike services. It has further placed on record their confirmations by way of contra accounts and debit notes. The same is n .....

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’s observation terming the assessee’s commission payments to be excessive, we notice that there is no comparative tabulation with market rate of such payments; if any before arriving at the said conclusion. We accordingly observe that the ld. CIT(A) has erred in directing the Assessing Officer to restrict assessee’s commission payments @3% after observing that the said authority had not been careful before disallowing the impugned payments wherein the assessee has placed on record all possible d .....

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- SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER For The Assessee : Shri Ketan H Shah, A.R. For The Revenue : Shri James Kurian, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER The assessee and Revenue have instituted instant cross appeals for assessment year 2011-12 against the CIT(A)-9, Ahmedabad s order dated 29.05.2015, in appeal no. CIT(A)-9/374/Wd.8(2)/14-15, deleting disallowance of commission payments of ₹ 67,77,001/- as made by the Assessing Officer .....

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at the CIT(A) ought not to have deleted the above commission payments disallowance as made by the Assessing Officer. We come to relevant facts first. 3. The assessee/a company is engaged in pharmaceutical business. It made commission payments to 13 parties totaling to ₹ 67,77,001/-. The Assessing Officer disallowed the same in assessment order after holding that although the assessee has filed all the relevant details alongwith confirmations, PAN particulars, TDS deductions, commission/lia .....

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carefully perused the assessment order and the submissions given by the appellant. The AO has given proper opportunity to the appellant and asked for the confirmations from the parties to whom commission and distribution charges have been paid. The show cause for commission paid account of ₹ 42,32,375/- has been given. Further, in the assessment order, the AO has relied on following case laws: (i) Assam Pesticides Vs. CIT [227 ITR 846], Gauhati HC (ii) CIT Vs. Premier Breweries Ltd. [279 .....

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arties. On the other hand, the appellant has filed different case laws and distinguished the decision of Swadeshi Cotton Mills Co. Ltd. reported at [63 ITR 57 (SC)] and instead felled on the decision of Anupam Synthetics reported at [104 TTJ 119 (Del.)]. The appellant has filed confirmation from the parties, TDS details, full addresses with PA No. and submitted that in their Pharma business the commission payment is a usual practice and without the payment of such commission, the conducting of b .....

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and the AO could have done the same as he is bestowed with such powers which would have been very much within the Departmental procedure. I have also gone through the copy of each of the appointment letters issued by the appellant company to the commission agents. The specific work or territory of operation is mentioned in such appointment letters. The working of commission / distribution charges to be paid along with brief note for each of the parties, has also been placed on record and gone th .....

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Parmar and also without examining aforesaid commission agents. It is further found that the assessee has made payment according to the agreement entered into and in reference to all the above nine parties TDS has been deducted. Confirmation received from all the parties which are also on record alongwith TDS certificate in Form No.16A. It is further found that the assessee has given reply dated 22.12.2012 placed on Paper Book Page 13 to 15, wherein in Para 9, it inter alia requested the A.O to .....

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ment in the case of Bharat Bijli Ltd. reported at [71 ITD 412 (Mum.)]. I am inclined to accept the argument of appellant and rely on the ratio laid down by Hon'ble Gujarat High Court in the case of Rohini Builders reported at [256 ITR 360 (Guj.)]. The ratio laid down by ITAT, Ahmedabad in the case of Deputy Commissioner of Income Tax Vs. Tyco Valves & Control India (P) Ltd. [(2013) 81 DTR (Ahd) (Trib) 48] is relevant and has been relied, "Assessee having furnished the statement of c .....

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commission thereon submitted, indicates that the services have been rendered for appellant's business by these commission agents. In my opinion, the appellant has discharged its onus by filing all possible details including confirmations (of all the nine parties) and TDS and successfully established that the genuine expenditure has been expended for the business purposes. On the other hand, the AO could not gather the positive evidences for the department and taken decision based on presump .....

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or current A.Y. 2011-12. The appellant's A.R. filed details of commission statement, ledger account of commission expenses, debit notes, confirmation of accounts, Certificate in Form No.16A issued to the parties, copy of the agreement with parties as under: Sr. Name of the party Address P.A. No. Amount of commission 1 Anupam Parmar B/60, Manokamna Tenament Nr. Kharawala Factory Isanpur, Ahmedabad APHPP5938G 26,000/- 2 Gokul Traders National Chambers Nr. City Gold Ashram Road Ahmedabad-3 8000 .....

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ldi, Ahmedabad ACMPT9447J 1,56,185/- 8 Vidur Corporation 304, Ruturaj Chamber Swastik Cross Road Navrangpura Ahmedabad ALEPT5316R 2,03,704/- 9 Rajendra B.Lattakar Pune Maharashtra AAKHR6322L 2,22,400/- 10 Shreejina Ketan & Co. F/61 Satellite Center Ahmedabad- 15 AAEPT5628H 1,90,832/- 11 Mrs.Anantha Laxmi Mysore AGCPA3781A 5,82,043/- 12 Manlax Lifesciences Inc 124, Aashar Enclave Kolshet Road G.B. Road Thane West- 400607 APMPK7685Q 82,917/- 13 Vijay J Shah 1 9/A Jain Merchant Society, Mahalax .....

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am of the opinion that appellant has not discharged its onus fully in respect of commission payment made to the above mentioned parties. In the agreement entered with the parties, the rate of commission payable is not specifically mentioned. The appellant has also not produced either in the assessment proceedings or in the appellate proceedings details of sales made through these parties showing name of parties, area, city, country, qty. rate of commission etc. for the purpose of authenticity o .....

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the assessment records, it is observed that rate of commission payment is ranging from 2% to 24% which seems to be on extremely higher side. There is no uniformity and basis for paying such commission to these persons. Moreover, the commission payment is also made to closely related party, viz. Shri Vijay J. Shah who is director in the appellant company. I have also observed that that every year major portion of commission, which is more than 50% of total commission payment made by appellant, h .....

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1 in the case of appellant the addition made against commission payment of ₹ 67,77,001/- is deleted with following remark. However in view of observation made by me, wrt to rate of commission paid by appellant company, the A.O. is directed to allow the claim of appellant after verifying the rate of commission payment and restricting the rate of commission payment @ 3%. Subject to this condition, this ground of appeal is partly allowed. 5. Heard both sides reiterating their respective stand .....

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hat neither the Assessing Officer nor the CIT(A) have given any cogent reason to adopt a different approach in the impugned assessment order. Ld. Departmental Representative at this stage strongly support Assessing Officer s action in order to restore the entire disallowance figure. We make it clear that there is not dispute that the assessee has actually made the impugned commission payments after deducting TDS thereupon at the prescribed rates in furtherance to various agreements with its paye .....

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