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

2017 (1) TMI 1334 - ITAT AHMEDABAD

2017 (1) TMI 1334 - ITAT AHMEDABAD - TMI - Allowability of business expenditure - Held that:- There is not even the list of marketing services vis-ŕ-vis the corresponding sales along with the commission payments in question so as to prove the argument that the former assessee had in fact availed marketing services of the latter assessee as per the relevant agreements on record and therefore, the impugned commission disallowances are liable to be deleted. - No merit in Shri Devatia’s last arg .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

No.3255/Ahd/2015 - Dated:- 24-1-2017 - SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri S. N. Divatia, A.R. For The Revenue : Shri P. S. Chaudhary, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This batch of four appeals pertain to two different assessees M/s. Asha Industries (India), Nadiad & M/s. Tona Tab Agency, Ahmedabad. Former assessee has filed its three appeals for assessment years 1990-91 to 1992-93 against CIT(A)-IV, Baroda s se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed 31.08.2015 in appeal no. CIT(A)/GNR/4/2009-10, affirming Assessing Officer s finding holding it as not to have performed any agency services to the former assessee thereby concluding it as a non genuine firm resulting in disallowance of expenses in the nature of salary of ₹ 40,500/-, travelling expenses of ₹ 32,315/- and advertisement expenses of ₹ 7,28,875/-; respectively, in proceedings u/s.143(3) r.w.s. 154 of the Income Tax Act, 1961; in short the Act . 2. A combined per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

estion as a case of extreme hardships in getting all the relevant information necessary for filing of the instant appeal. The Revenue fails to rebut the said solemn averments in assessees condonation petition. We thus find merit in assessees condonation petitions and conclude that the delay in question involved in filing of all four cases in neither intentional nor deliberate. We now proceed to adjudicate all these appeals on merits. 3. First of all we deem it appropriate to start with relevant .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r assessee M/s. Asha Industry filed its return stating incomes of ₹ 5,43,251/-, ₹ 7,45,800/- and 9,22,625/- in assessment years 1990-91 to 1992-93. The Assessing Officer completed regular assessments in the said assessment years. He thereafter formed reasons to believe that M/s. Asha Industries taxable income liable to be assessed had escaped assessment for the precise reason that latter assessee s assessing authority has noticed in the course of its assessment that it had not perfor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee M/s. Tona Tab Agency as under: 4.2 I have considered the appellant's submission and the AO's observations. In this case, the AO of M/s Tona Tab Agencies has conducted several enquiries in relation to receipt of commission by this person from the appellant. The relevant parts, findings and observations are reproduced on pages 2 to 6 of the assessment order in the case of appellant. A perusal of such observations shows that though the office of M/s. Tona Tab Agencies was in Ahmedaba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

AO issued a letter to Shri. Indubhai M Patel, another partner of M/s. Tona Tab at his Nadiad address and requested him to explain the reasons for giving commission to M/s. Tona Tab Agencies who had infact not rendered any service to the appellant i.e M/s. Asha Industries. A statement of Shri. Indubhai M Patel was also recorded in which it was found that he was partner in his HUF capacity in the firm of M/s. Tona Tab Agencies and a partner in his individual capacity in the appellant firm. He stat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/1987 regarding payment of commission. The AO of Tona Tab Agencies issued another letter to the appellant firm on 30/10/1992 vide which the appellant was requested to explain as to why the income of M/s. Tona Tab Agencies should not be clubbed in its hands. The reasons given by the AO were as follow:- "1. The entire management and control of M/s Tonatab Agency is from Nadiad. 2. The Bank account of the firm is in Nadiad Bank. 3. There is no evidence in support does not know anything about 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

ement. No evidence is produced in support of this area of management." 4.2.1 In response to this letter, the appellant firm replied that the AO of M/s. Tonatab Agencies did not have any jurisdiction over the appellant firm and hence cannot write any letter to it. It was also stated that as per agreement M/s. Asha Industries has to pay over riding commission @ 10% on net sale proceedings affected to the Tona Tab Agencies. Finally AO of the Tona Tab Agencies held as follows:- Para 7 "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

sha Industries and M/s Tonatab Agencies is controlled and conducted by Shri. Indubhai M. Patel. During the course of scrutiny of Profit & Loss A/c it was noticed that the assessee has claimed Advertisement expenses of ₹ 2,65,313/-. On further, inquiry, it was found that major portion of the advertisement expenses was paid to painters and Artists situated at Nadiad (Painter Ramesh Rao, Samir Art etc.) The assessee has claimed Travelling expenditure of ₹ 46,488/-. Three entries on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fulbhai Patel working regarding Advertisement. 2. Shri. Natubhai A. Patel Accountant. 3. Shri. Shallesh. T. Patel- Sales, Advertisement. 4. Shri. Chandubhai C. Patel - Sales, Advertisement. It was further admitted that all these employees are working at Nadiad office. The assessee was requested to produce sales Bills, to verify whether orders are booked by Agents and whether the name of the Agent is mentioned in the said bills or not? The assessee was produced Invoices No.37, 24, 11 and 2 for sa .....

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 M/s Tonatab Agencies on "Protective Basis' with a finding that the commission receipts shown by M/s Tonatab Agencies should not be allowed in the case of M/s Asha Industries, registered firm at Nadiad. Latter to this effect is already written to the Assessing Officer i.e. Asstt. Commissioner of Income-tax, Circle, Nadiad and the copy of this order will be sent to him for favour of his information and necessary actions in the case of M/s Asha Industries. The entries claim of Advertisem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Tona Tab Agencies to the appellant firm for which the commission was being paid by the appellant has been provided, despite the fact that both the firms are having common partners and hence are related concerns. Hence such commission payment is not allowable as a deduction in computation of the appellant's income. This backdrop of facts leaves the former assessee aggrieved. It has thus filed its three appeals for assessment years 1990-91 to 1992-93. 4. We now advert to latter assessee M/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

served in its consequential order dated 24.12.2007 the assessee failed to file any substantive evidence of having provided marketing services to M/s. Asha Industries. He refers to a copy of agreement between these two parties dated 15.02.1973 and 01.11.1973 regarding marketing services commission @15% later on modified to 10% on 23.10.1987. The Assessing Officer observed that the said agreements made it clear that the former assessee would not pay any commission on direct sales through VIP, loca .....

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 in para.4 of this order, AO while finalizing the assessment for the year under appeal noticed that appellant had received commission for AYs 1990-91 to 1992-93 from M/s Asha Industries against which they claimed deduction for various expenses. In the year under appeal, following the line of action in preceding years i.e. AYs 1990-91 to 1992-93, determined income of M/s Tonatab Agency-on PROTECTIVE BASIS with a finding that the expenses commission received by M/s Tonatab Agency should not be al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ance of Commission payment to M/s Tonatab Agency. Thereafter, department went in further appeal before the Hon'ble ITAT, both in the cases of appellant firm M/s Tonatab Agency as well as in the case of M/s Asha Industries for A.Y. 1990-91 to 1992-93, wherein the Hon'ble ITAT has set-aside the matter at the level of Hon'ble CIT(A). However, in the case of the appellant, the issue was set-aside to the file of the AO and AO has passed an order on the directions of Hon'ble ITAT, made .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n direct sales by VIP, local sales at Nadiad and on export sales. After considering the facts of the case and the agreement and amended agreement, AO Officer has finalized the assessment on protective basis. The AR of the appellant Shri Sunil Talati, CA attended the appellate proceedings from time to time and he was; asked regarding the status of appeals of Asha Industries filed with CIT(A)-4, Baroda/ Shri Talati vide letter dated 13/3/2015 stated that cases were pending before the CIT(A)-4, Bar .....

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 the expenses claimed by the appellant which is disallowed by the AO are bogus and non-genuine. Further, it is also submitted by the AO that Asha Industries has not gone in further appeal against the order passed by the CIT(A)-4, Baroda which proves that the view of the AO has been accepted by M/s. Asha Industries. AR of the appellant was specifically asked about the fate of the order of the AO in the case of Asha Industries for AY 1993-94 at the appellate stage. The AR of the appellant has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

appellant and Asha Industries dated 15/2/1973 and amended agreement dated 1/11/1973 wherein it is specifically mentioned that M/s. Tona Tab Agency will not be paid any commission on direct sales by VIP, Local Sales at Nadiad and on export sales, it was contended by the appellant before the AO that they had made a minor change in Clause 4, however, no documentary evidences furnished before him. Even during the current appellate proceedings, AR of the appellant has not submitted any documentary to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

encies case for assessment year 1990-91 to 1992-93 substantively assessing the amounts received from M/s. Asha Industries as its income to be substantively assessed reading as under: 8. We have careful consideration to the rival contentions. The finding of fact recorded by the CIT(A) that neither there is any disallowance of commission in the case of M/s Asha Industries nor has the income of the assessee been clubbed with the income of M/s Asha Industries, has not been rebutted before us by an e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aracter of the assessee firm. We would however like to mention that mere fact that the firm has been granted registration, does not bind the AO to assessee the alleged income from any source on substantive basis in the hands of the firm. However, as already pointed out, this issue has become irrelevant, in the light of no substantive assessment having been made of the income assessed by the AO on protective basis in the hands of the assessee. We accordingly confirm the conclusion of the CIT(A) 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

ommission s payment in the very impugned assessment years in the reassessment in question framed in February 1996 i.e. much before the tribunal s order dated 19.11.2011. The above co-ordinate bench s findings are accordingly not based upon correct appreciation of facts. The assessee s first argument is rejected. 8. Shri Divatia next argument is that the former assessee had in fact availed marketing services of the latter assessee as per the relevant agreements on record and therefore, the impugn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tter contention as well. 9. We further do not find any merit in Shri Devatia s last argument that the department itself has been allowing these assessees claims regarding rendering of marketing services in all earlier assessment years. We observe in these peculiar facts that each and every assessment year is a separate unit and merely because an assessee has proved some expenses in earlier assessment year does not ipso facto lead to a conclusion that the very payee has rendered in fact the very .....

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