TMI Blog2018 (1) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in us in accepting the same in support of assessee’s contention. In the entirety of facts and circumstances, we are unable to accede to the contentions so raised by the ld AR - Decided against assessee Addition on account of donation made - deduction u/s 80G - Held that:- As assessee has made the said donation to Hare Krishna Movement, Jaipur which is registered u/s 80G and the payment has been made through cheque dated 12.09.2008 and receipt thereof submitted during the appellate proceedings. No infirmity in the order of ld. CIT(A) who has considered the relevant facts which have been brought on record by the assessee during the appellate proceedings and deduction u/s 80G was allowed. - Decided against revenue Allowance of deduction u/s 80E - Held that:- On perusal of section 80E, it provides for deduction in respect of interest on loan taken by the assessee from any financial institutions for the purpose of higher education of his relative. There is no bar that the loan cannot be taken in the joint name of the assessee and his relative. So long as the loan has been taken in the name of the assessee, even if he happens to be co-applicant and co-borrower, and so long as pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s appeal. In its sole ground of appeal, the assessee has challenged the sustenance of disallowance of commission on sales paid to Smt. Pushpa Khandelwal amounting to ₹ 8,04,234/-. 3. The facts of the case are that during the course of the assessment proceedings, the AO observed that the assessee has shown commission payment on sale of ₹ 8,04,234/- to Smt. Pushpa Khandelwal, who is the proprietor of M/s Steel Corporation of India, Jaipur and filing her return of income with ACIT, Circle-3, Jaipur. The nature of business mentioned in the audit report in respect of her business was shown as trading in iron steel and is a covered person u/s 40A(2)(b) of the IT Act, 1961. A show cause was issued as to why commission paid to Smt. Pushpa Khandelwal should not be treated as bogus commission on sales and be added to the total income of the assessee. 4. In response, the assessee submitted that commission was paid on supplies of goods through Steel Corporation of India. In audit report mentioning of trading in iron and steel does not mean only own purchases and sale, it also covers supplies of iron steel goods through other parties on commission basis. Firm is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion payment to Smt. Pushpa Khandelwal. So considering the above facts and findings, he treated that payment made to Smt. Pushpa Khandelwal of ₹ 8,04,234/- as not genuine and unreasonable and disallowed the same and added to the total income of the assessee. 8. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has confirmed the said disallowance. The relevant findings of the CIT(A) is reproduced as under :- 6.2 The AR of the assessee Shri P.C. Jain attended filed the following submissions:- As regards Commission of ₹ 804234/- paid to Steel Corporation of India Prop. Smt Puspha Khandelwal, we submit that commission was paid for actual services rendered. Although Steel Corporation is engaged in business of Iron steel but they are not competitor. Business of Steel syndicate mainly deal in SAIL product but steel corporation deal in other product. They have provided customer to steel syndicate of India in consideration of Commission. It was not paper entry. She is in this line from 25 years. She has paid Income tax on such income @ about 25%. It was not with intension of evasion of tax. No agreement is necessary for allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pa Khandelwal who is engaged in the trading of medium and light items of Iron and Steel and majorly trades in the products of Rastriya Ispath Nigam. Thus, although they were engaged in trading of iron and steel but were not competitors since their line of business was different. 10. It was submitted that the ld. CIT(A) upheld the addition made by ld. AO by stating that assessee failed to give the names and address of the persons to whom sale were made through Pushpa Khandelwal. In this regard it is submitted that as already submitted before ld. CIT(A), the assessee was never asked to furnish details of name and address of persons to whom sales were made through Pushpa Khandelwal. The assessee made sales of various items to Bharat Trading Co. Ltd. Mumbai. The said fact can be verified from the ledger of the said Company in the books of assessee and Journal Voucher of commission to Pushpa Khandelwal which are submitted as additional evidences and a prayer for which is separately moved. 11. It was further submitted that the ld. CIT(A) further upheld the disallowance by making a note that the assessee failed to give the names and address of the persons to whom sale were made thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al It was submitted that the assessee was under bonafide belief that no such evidences are necessary as during the assessment proceedings no such details were asked to be submitted by ld. AO. The assessee during the appellate proceedings submitted before ld. CIT(A) that names and address of persons to whom sales were made through Pushpa Khandelwar were not asked by ld. AO. However, ld CIT(A) again disallowed the commission by stating that no evidence in this regard was submitted. Thus, the assessee is now submitting the said evidences. It was submitted that all the evidences mentioned above are vital and go to the root of the matter which is before the ITAT for adjudication and the same may kindly be taken on record. 17. The ld. DR supported the order of the lower authorities and also relied on following decisions:- DCIT vs. Mcdowell Co. Ltd. 291 ITR 0107 (KAR) Onam Agarbathi Co. vs. DCIT 310 ITR 0056 (KAR) ACIT vs. Mehru Electrical Engg. (P) Ltd. [2011] 128 ITD 247 (JP) 18. We have heard the rival contentions and purused the material available on record. The assessee has claimed commission expenditure of ₹ 804,234 while f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure and that includes, the name and address of persons to whom the sale were effected during the year. In the instant case, even if we were to allow the admittance of additional evidence in form of ledger of Bharat Trading Co. ltd and copy of voucher of commission payment to Pushpa Khandelwal at this stage, the same by itself will not help the assessee in discharging the initial onus cast on it. How would one determine that the sales to Bharat Trading Co. ltd were effected through the efforts of Pusha Khandelwal in absence of any communication with Bharat Trading Co. ltd showing the involvement of Pushpa Khandelwal in effecting such sales and there is also no confirmation from Bharat Trading Co. ltd as well which confirm the fact that she was involved and facilitated the sales so claimed to have been effected through her. Secondly, merely the fact that the basis of payment has been specified in the payment voucher and the payment has been effected during the year or the fact that the latter has offered the same in her return of income doesn t by itself is sufficient to hold that the services have been rendered and the expenditure is allowable. What is of relevance is the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. As per the Assessing Officer, commission was paid by the assessee on purchases for the first time in this year and in the past 15 to 20 years, the assessee has never shown to have paid any commission on purchase. It was accordingly held that the assessee has failed to prove the genuineness regarding the commission payment. It was further observed by the AO that Shri Arpit Khandelwal happens to be son of the assessee and he is also drawing the salary besides the commission payment so made during year. It was further observed by the AO that the assessee is making purchases from Essar Steel Ltd earlier as well and there is no new things which has been done by Shri Arpit Khandelwal in respect of the purchase made during the year. It was held that it was merely book entry which has been made on the last day of the financial year. It was further observed that there is neither any agreement nor any correspondence with Shri Arpit Khandelwal regarding the commission payment for liasioning with Essar Steel Ltd. It was observed by the AO that Shri Arpit Khandelwal is the employee of the assessee and for which he is getting the salary and by stating that he was overall in charge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not merely a book entry. It was submitted that employee can be given separate commission for purchase of goods other than salary and it is not necessary that an employee is duty bound to do all the work without any extra benefit. It was submitted that all the reasons given by the Assessing Officer for disallowance of commission is baseless and on suspicious basis without taking into account commercial expediency. 23. The ld. CIT(A) taking into consideration the submission of the assessee deleted the disallowance to the extent of ₹ 7,40,521/- out of total commission of ₹ 778,597 against which the revenue is in appeal before us. The ld. DR relied on the order of the Assessing Officer. 24. The ld. AR submitted that during the year under consideration, commission on purchase was paid to Mr. Arpit Khandelwal who is son of the assessee. Mr. Arpit Khandelwal is Bachelor of Science (with Honours) in Mathematics, Operational Research, Statistics and Economics from University of Senate. After completing his studies, Mr. Arpirt Khandewal joined the business of the assessee during the relevant previous year. Mr. Arpit Khandewal was engaged in liaison with Essar Steel Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the claim of the assessee that there was an increase in the business of the assessee by 19.46% from the previous year. On the other hand the assessee has brought on record the correspondence by Arpit Khandelwal with Essar Steel to establish that he actually worked to earn this commission. Regarding the FMV of the services, as per the submissions of the AR commission was paid @ ₹ 1000/- per ton on purchases to Hare Rama Hare Krishna Corals Pvt. Ltd. whereas the rate of payment of commission to Shri Arpit Khandelwal was ₹ 1,050/- per ton. Thus commission paid by the assessee to his son was more than the FMV by ₹ 50/- per ton. The total quantity purchased by the assessee through the services of Shri Arpit Khandelwal was 740.521 tons during this AY. Therefore a disallowance of ₹ 38,076/- u/s 40A (2) is confirmed from the commission paid to Arpit Khandelwal. 26. We have heard the rival contentions and purused the material available on record. Firstly, regarding the commission on purchases paid for the first time by the assessee, the ld AR submitted that in this line of business and at the relevant point in time, the access to the products of Essar Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent for necessary verification before the AO. Further, where the purchases are effected through the commission agent s efforts during the year, the documentation in support of such purchase efforts and involvement of the commission agent in effecting the purchases in form of communication, confirmation from the customers, and the products, the price and the customers to whom such products have been purchased through such commission agent. Once the assessee discharge the initial onus by producing the necessary verifiable evidence, the onus will then shift on the AO to prove otherwise. 28. In the instant case, what we find is that there is nothing that has been brought on record except certain correspondence of Arpit Khandelwal with Essar Steels and a copy of voucher signed by Arpit Khandelwal. The ld CIT(A) has returned a finding that on perusal of the evidence brought on record, it is seen that Shri Arpit Khandelwal did liaison with Essar Steel Ltd. during the year for purchase of goods and this was the first year in which purchases were made from Essar Steel Ltd. and further, Arpit Khandelwal has reported the said commission payment in his return of income and has paid taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als Pvt. Ltd., the assessee has added new product in their business and in future, it would be highly beneficial to them. It was submitted that even though they do not have any agreement with them but does not mean that they cannot be paid any commission for services rendered by them. It was submitted that commission was paid for actual services rendered to them and it was not bogus and the basis of calculation of commission has been given in the confirmation and copy of memorandum of association of the payee company was enclosed. 30. The submission was however not found acceptable to the Assessing Officer. The Assessing Officer, after looking at main objects of M/s Hare Rama Hare Krishna Corals Pvt. Ltd. as per its memorandum, observed that the payee company is expert in the field of ornaments, jewellery articles, gold, silver, platinum etc. and it has no knowledge about the field of iron steel. It was observed by the AO that the assessee has advanced an amount of ₹ 15,00,000/- to M/s JSW Steel Ltd., Jaipur and thereafter the goods have been delivered to the assessee. It proves there is no role of mediator or agent with the transactions from JSW Steel Limited. It was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance could be made. After considering the assessee s submission, the ld CIT(A) deleted the disallowance so made by the AO and now, the Revenue is in appeal before us. 32. The ld. AR submitted that the assessee has paid commission on purchase to Hara Rama Hare Krishna Coral (P) Ltd @ 1,000 per ton. The Company did liaison with JSW Steel Ltd and because of their efforts a new product was added to the business of the assessee in the relevant previous year. During the course of appellate proceedings it was submitted that the Company was authorized by subsidiary clause of its Memorandum of Association to carry out business of Iron and Steel on commission basis. Further confirmation of the Company along with details of PAN were submitted before ld. CIT(A). It was submitted that ld. CIT(A) correctly, keeping in view the surrounding circumstances and facts of the case allowed the commission paid on purchase to Hare Rama Hare Krishna Coral (P) Ltd. amounting to ₹ 8,43,160/-. 33. The relevant finding of the CIT(A) is reproduced as under: 2.3 I have carefully perused the order of the AO and the submissions of the AR and concur with the submissions of the AR on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case. We find that there is no iota of evidence on record that has been submitted either during the assessement or appellate proceedings in the instant case. Further, it is no doubt true that a company can carry out activities in furtherance of not just the main objects but also in accordance with its subsidiary object clause. At the same time, on a pointed question raised by the AO to demonstrate the expertise of the company in the business of Iron and steel given that it was mainly involved in gems and jewellery business, the assessee has stated, though in the appellate proceedings, that the director of the company has the necessary knowledge and for doing business of branded product, no depth knowledge is needed. The question is if no depth knowledge of the industry is required, how the Director of the company has facilitated such purchases from JSW Steel and for that matter, what was the necessity of hiring the services of the company. In any case, there is nothing on record to demonstrate the particulars of the director, his age and experience in handling similar kind of purchase transactions in the past. There is no evidence on record in form of correspondence/communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- .....After considering the assessment order as well as finding given by the learned CIT(A) we hold that no specific defects had been pointed out by the lower authorities except holding that they were claimed on self made vouchers. The assessee had incurred these expenses on staff welfare, which are required to maintain the cordial relation with the staff, so that the company s target can be achieved. We find that these expenses were incurred wholly and exclusively for the business purposes, therefore we delete the addition confirmed by the learned CIT(A) on this ground. Accordingly, this ground of assessee s C.O. is allowed... 38. We have heard the rival contentions and purused the material available on record. The AO while disallowing the amount of commission has recorded a finding that looking into the facts and the nature of business, the commission is necessary to pay at the time of sales but the assessee has failed to give the details and other things. Considering the same, he disallowed 10% of commission of ₹ 81,69,526. We find that said disallowance is purely on an adhoc basis and the same cannot be sustained in the eyes of law. In the result, the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant and co-borrower, and so long as payment of interest is made by the assessee, we don t see any specific bar in terms of section 80E which can disallow such claim of the assessee. Further, there is no finding that Shri Arpit Khandelwal has made a similar claim in his return of income. So long as the payment of interest is effected by the assessee on loan taken by him, he stands eligible for deduction under section 80E of the Act. In the result, ground no.3 of the Revenue s appeal is dismissed. 43. Regarding ground No. 4 of the Revenue s appeal, the facts of the case are that during the course of assessment proceedings, the AO observed that the assessee has taken unsecured loan of ₹ 13,56,69,991/- and has paid interest amounting to ₹ 1,58,28,017/-. It was further observed by the AO that assessee has advanced an amount of ₹ 42,21,000/- to his sister concern M/s Arpan Infin Pvt. Ltd., without any interest. A show cause notice was accordingly issued by the AO as to why interest @ 12% which comes to ₹ 5,06,520/- be not added to the total income. In response, the assessee submitted that the proprietor capital is of ₹ 2,52,33,263/- which is more than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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