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2017 (2) TMI 336 - ALLAHABAD HIGH COURT

2017 (2) TMI 336 - ALLAHABAD HIGH COURT - TMI - Revision u/s 263 - issue of paying of commission to the sales agency was not examined earlier by the Assessing Officer - Held that:- Tribunal came to conclusion that assessee was in no way in control of the selling agent. Further the tribunal also examined the documents relating to the approval granted by the Government of India, Ministry of Law, Justice & Company Affairs issued under Section 294 AA of the Companies Act, as this approval was requir .....

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using prejudice to the revenue, nor were there any circumstances to contemplate the taking of any action under Section 263 of the Income Tax Act by the department. The tribunal, therefore, came to conclusion that the commission paid to the selling agent was based on sound and genuine business consideration and therefore, the allowances have rightly been allowed by the A.O. The disallowance made by the CIT was therefore, deleted by the Tribunal. - Having heard the counsel for the both the sid .....

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#39;ble Vinod Kumar Misra, JJ. For the Appellant : S. Chopra, B. Agarwal For the Respondent : P.K. Jain, Dhruva Agarwal, Nikhil Agarwal ORDER Heard Sri Ashish Agrawal, learned counsel for the department and Sri Nikhil Agrawal, learned counsel for the assessee. As the controversy involved in these appeals is identical, the same is being decided by a common judgment and order treating the Income Tax Appeal No. 100 of 2003 as the leading case. This is department's appeal filed under Section 260 .....

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as completed under Section 143 (3) vide order dated 29.12.2000. The returned income of ₹ 2,47,23,220/- was accepted. As per Profit and Loss A/c the assessee has claimed various expenses including deduction on account of payment of commission of ₹ 72,92,319/- to its sister concern M/s. Micro Matic Machines and Tools (P) Ltd. besides expenditure of ₹ 19.14 lacs was claimed as exhibition expenses Rs, 26,14,832/- as travelling and conveyance and ₹ 10,27,446/- as advertisement .....

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he assessee has been allowed by the A.O. without proper verification and also took a view that the recipients, who was sister concern had not rendered any services for the benefit of the company and by getting this allowance the assessee had, in fact, evaded the payment of proper tax. Aggrieved by the order passed by the CIT the assessee went to appeal. The tribunal has examined the matter threadbare specially with reference to the amounts paid towards the commission. The tribunal records in its .....

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but also with regard to other aspects of the expenditure. Detailed questionnaires were issued vide order sheet entries through which specific queries were raised. After issue of notice u/s 142 records of the assessee were examined which took place on many dates running for several hours at a stretch. We are, therefore, of the opinion that the basic premises of CIT, Ghaziabad, that owing to the fact that returned income was accepted and, therefore, no enquiries were made is factually incorrect. .....

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and in the subsequent year ₹ 10.15 crores. Therefore, the second premise of CIT, Ghaziabad of initiating proceedings u/s. 263 is also factually incorrect. (8) The third issue raised by CIT, Ghaziabad in his notice is that the sole selling agent of the company has made a loss whereas the assessee has made a profit and, therefore, the payment of selling commission is only to reduce the tax liability. This again is an inherent fallacy. The selling agent as the assessee have been taxpayer for .....

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ore than 25 lakhs in this year vis- a- vis the amount spent in the previous year. In addition the selling agent is a tax payer and is assessed in Special Range 27, Delhi and in the year under review, assessment had been done by JCIT, New Delhi and disallowances etc. had been made in respect of foreign travelling and exhibition expenses against which the sole selling agent had filed appeals. These are separate proceedings and no adverse inference should have been drawn in respect thereof, especia .....

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o took a note of the fact that there was an agency agreement between the two parties, which showed the various responsibilities of the agent which were noted by the Tribunal as hereunder: "(13) The AR also took us through the selling agency agreement which showed the various responsibilities of agent which are: (i) To convince the prospective customers of the utility of the machine manufactured by the company. (ii) To collect the advances/deposits against the orders as per agreed terms. (ii .....

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