TMI Blog2019 (5) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... ement material etc. Such services were being provided since financial year 2007 08 and learned assessing officer has accepted these payments Payment of commission made to M/s Action Udyog CIT A noted that that these party is actually acted as a trader which purchased shoes from appellant and for which payment made to appellant by it. Such items were sold by this entity to customers at same price for which it was paid fixed profit at rate of 8% of turnover in terms of agreement dated 1/4/2009 - evidences placed by assessee for commission paid to A S Marketing have been considered by assessing officer for making disallowance with respect to payment of commission to this party. Therefore it is submitted that it is not a payment of commission to commission agent but sale of goods at fixed percentage of profit. CIT A has deleted disallowance after considering facts of case placed before him by assessee as well as reasons recorded by assessing Officer in making disallowances. Learned CIT A further made certain enquiries and based on which he deleted disallowance. Therefore we do not find any infirmity in order of learned CIT A in deleting disallowance -Decided in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,12,64,515/- to M/s Action Udyog by holding that payment to M/s Action Udyog was not commission payments but sharing of profit without even considering terms and conditions of agreement dated 01.04.2009 between assessee and M/s Action Udyog even after relying on same in order? 4. Whether in facts and circumstances of case and in law Ld. CIT(A) is justified in deleting disallowance under section I4A of Act read with rule 8D of Rules ignoring a fact that assessee had earned tax exempt income under Act during year under consideration? 5. Whether on facts and circumstances of case and in law. Id CIT (A) is justified in relying on decision of Hon ble Delhi High Court in case of Holcim Pvt. Ltd. 133 ITR 470/4 Taxman 58(Del.) in spite of fact that ratio as laid down in case is not applicable to peculiar facts of assessee? 6. Whether on facts and circumstances of case and in law, Ld. CIT(A) is justified in deleting disallowance u/s 14A of Act read with rule 8D of Rules by laying down a new legal proposition that tax exempt income under Act will become taxable income in cases where an assessee erroneously chooses to pay on exempt income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee also submitted purchase orders pertaining to 13 companies and highlighted portion to indicate that there is some reference to either name of employee of agent, email or cell phone number to prove existence of agent as acknowledged by customer. learned AO examined claim of assessee and rejected same for following reasons:- a. Those customers did not acknowledge existence of agents and their involvement in any part of negotiation or purchase and sale. In fact in one of customers it was found that AS Marketing is only providing services from 2011 and there was no agent involved with respect to ITC during financial year 2009 10. b. No confirmation were provided by assessee except some purchase order wherein some names, emails and telephone numbers are mentioned without adducing any proof as to who or what they are pertained. c. Merely making payment through proper channel does not allow assessee to claim these expenses without proving that services have been rendered. 03. Therefore he disallowed commission expenditure of INR 1 8775015/ . 04. During course of assessment proceedings, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax thereon. learned CIT A also examined computation of total income and profit and loss account produced before him which confirmed statement made by assessee before him. Learned CIT A deleted addition as dividend income of INR 1579 was only earned by assessee and further other investments are made in sister concern, therefore according to him no disallowance is sustainable under section 14 A of income tax act. Therefore revenue aggrieved with order of learned CIT A has preferred an appeal before us. 07. Adverting to ground number 1 3 of appeal which is related to disallowance of commission expenditure deleted by CIT A, learned departmental representative referred to facts stated by learned assessing officer in assessment order. He reiterated reasons recorded by learned AO for making disallowance and submitted that learned CIT A has deleted disallowance without verifying facts in a proper perspective. He submitted that learned CIT has considered only a part of replies filed by these customers. He further stated that learned CIT A has also ignored fact that purchases were directly made from assessee and not to commission agent. He further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly all these disallowances have not been contested by revenue. He further submitted that merely for assessment year 2010 11 these appeals have been filed and in all other AYS disallowance deleted by learned CIT A has been accepted by revenue. He also submitted that commission paid to A S marketing is also accepted as allowable by the ld AO as stated in the chart. Therefore for reason of consistency and having accepted decision in one assessment year, learned AO should not have agitated this issue. 09. We have carefully considered rival contention and perused orders of lower authorities. During year assessee has achieved turnover of INR 1 001398163/ and has made a total payment of commission of INR 1 8414515/ . Out of which commission in dispute is a commission paid to AS marketing of INR 7 150000/- and of ₹ 11264515 to Action Udyog. Claim of assessee before AO was that it has engaged agents for obtaining purchase order, their employees were given reference card and letter pad of appellant company to procure orders. They also rendered services relating to such procurement of orders. Confirmation letters in this regard were also filed. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact been rendered by these parties to assessee for which payment of commission has been made. He further referred to query letter issued by learned assessing officer u/s 133 (6) of act dated 12/3/2013 to various buyers and noted that that questions at serial number 2 and 3 found by assessing officer in those query letters are leading questions such as (i) whether buyers are aware of any letter appointing agent on behalf of assessee and further (ii) whether such order was placed to enter or was any negotiation in order, whether an agent was involved in any negotiation of purchases. He further noted that proprietor of recipient of commission and his employees were representing appellant before customers for last several years prior to disallowance and after disallowance. Therefore he noted that it is clear that customers had undoubtedly interacted with commission agent over years without necessarily being aware of their actual legal relationship with appellant and by treating them as representative of appellant. He further referred to various evidences in form of email exchange with customer and commission agent which clearly proves that services have been rendered by them. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of INR 51,500,000. He further noted that this party is not at all related party to assessee and therefore he deleted disallowance with respect to above payment. 11. Further before us, assessee has submitted a detailed chart which shows history of payment of commission from assessment year 2008 09 till 2018 19. On basis of chart, it was found that assessee is paying commission to A S Marketing since assessment year 2008 09. For that year assessee claimed a commission payment of INR 4 044960/- to that party and same has been allowed as deduction by learned assessing officer. Further for assessment year 2009 10, commission of INR 5 602240/ was paid by assessee which was also allowed by learned assessing officer without any dispute. Further from assessment year 2010 11 assessee also started paying commission to M/s Action Udyog which continued up to assessment year 2012 13. For all these years learned assessing officer disallowed claim of assessee, however learned CIT A has deleted disallowance, learned departmental representative could not controvert that when learned CIT A has deleted disallowance, whether those have been contested before higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INR 1 95658/ is incorrect. Therefore now whole issue is required to be examined from aspect of exempt income of only INR 1 759/- and whether disallowance is required to be made u/s 14 A of income tax act with respect to earning of exempt income. It is not at all relevant to fact that whether assessee claimed that income as an exempt income, inadvertently or advertently, pays tax on that. In all circumstances provisions of section 14 A applies as soon as assessee earns an exempt income. It is an altogether a different aspect that whether assessee has incurred any expenditure or not, which is required to be tested subsequently, but provisions of section 14 A triggers as and when assessee earns exempt income. As it is a fact that disallowance cannot exceed exempt income, therefore without going into merits of fact whether assessing officer has recorded satisfaction or not, we direct learned assessing officer to restrict disallowance u/s 14 A of income tax act to extent of INR 1 759/ only. To his proposition, ld AR also agreed. Accordingly ground number 4 7 of appeal of AO is partly allowed. 15. Ground number 7 of appeal is general in nature, no argume ..... X X X X Extracts X X X X X X X X Extracts X X X X
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