9911796707
TMI Blog2017 (10) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... g and sale of organic inorganic and micronutrient fertilizers. Assessee filed the original return of income on 29-09-2010 declaring total income of Rs. 1,16,41,403/-. In the scrutiny assessment made u/s.143(3) of the Act, the AO determined the assessed income at Rs. 2,01,61,000/-. Among many, the AO made addition of Rs. 27,79,911/- on account of disallowance u/s.14A of the Act and disallowance of Commission u/s.40A(2)(b)(iv) r.w.s. 36(1)(ii) amounting to Rs. 41,33,000/-. AO rejected the assessee's submission that revolves around the settled presumption of making investment out of the interest free funds in the exempt income yielding investments. In the process, the AO strictly followed the computation provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w take up the appeal of the Revenue. Grounds raised by the Revenue read as under : "1. The order of the Ld.CIT(A) is contrary to law and to the facts and circumstances of the case. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the disallowance of expenditure of Rs. 41,33,000/- u/s.36(1)(iii) r.w.s. 40A(2)(b)(iv) of the I.T. Act made by the Assessing Officer on account of commission paid to working directors and other employees. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has failed to appreciate the fact that there was abnormal increase in payment of commission during the current year as compared to preceding year altho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Before us, the Ld. Counsel for the assessee read out the said written submissions and explained the arguments on the factual matrix relating to this issue. He further mentioned that the AO must not step into the shoes of the assessee when it comes to running of the business and requirement of making payment of commission etc. He also submitted that the recipients of the commission were taxed independently at the maximum marginal rate. Therefore, there is no loss of Revenue on this account. 9. The Ld. DR for the Revenue relied heavily on the order of the AO and submitted for confirming the addition. 10. On hearing both the sides, we have gone through the paper book filed before us. We have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, we find that the CIT(A) considered the fact that the commission was paid as per the Board Resolution and Authorisation of the Board of Directors. The CIT(A) also held that the services rendered are proportionate to the commission paid by the assessee. She also discussed the fact that recipients of the commission have paid the taxes on the said commission at the highest tax rate. So far as the contention of the AO on the commission issue paid to relatives, she mentioned about not bringing any comparable cases to demonstrate the unreasonableness or excessiveness of the same. Therefore, in our view, the view taken by the CIT(A) on this issue is one of the possible conclusions. The order of the CIT(A) is fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the facts of the present case. CIT(A) also referred to the Special Bench decision in the case of ACIT Vs. Cheminvest Limited Vs. CIT reported in 124 TTJ 577 before confirming the addition made by the AO. 15. Aggrieved with the order of CIT(A) the assessee is in appeal before us. 16. Before us, Ld. Counsel for the assessee submitted that the exempt income is only Rs. 17,8,000/- whereas the disallowance made by the AO is to the tune of Rs. 27,29,202/-. On the faces of it and considering the settled legal propositions, the same is not legally sustainable. Various decisions are in existence for the proposition that disallowance if any u/s.14A of the Act should not exceed the exempt income which form par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the AO. 18. We heard both the sides. We find it is obvious inference that assessee has adequate interest free funds and assessee also earned profits in the current year. All these funds are sufficient enough to take care of the investments considering the principle of presumption, laid down by the jurisdictional Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd., (supra). Therefore, in our view, the order of the CIT(A) on this issue requires reversal on this issue. Accordingly, the ground raised by the assessee to the extent of disallowance of Rs. 27,29,202/- stands deleted. 19. Regarding the addition of Rs. 50,909/- (Rs. 1,35,676 - Rs. 84,967) the disallowance made ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
