TMI Blog2014 (6) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... ing mentioned in the Volker Commission Report cannot stand. Records show that even these contingencies also did not arise in this case as neither the name of appellant company has been proved to have figured in the Volker Commission Report nor has the payment been proved to be of the nature of a kick-back nor even it has been shown that the necessary permission from UN was not taken. So far as the nature of the payment is concerned, it has clearly been established that the payment was made purely for the purpose of procuring export order of Forklift Trucks to Iraq and also certain after-sales services performed by the Agent in Iraq and was of the nature of commission payment. As stand taken by the learned CIT(A) that in absence of deduction of tax at source from the payment, it is hit by the provisions of section 40( a )( i ) of the Act, also is not tenable. There is nothing on record to show that any part of the activities of the Iraq; Agent was performed in India. The payment was also received by them in Jordan. Absence of any Permanent Establishment or Business connection of the Agent in India also takes the case out of the purview of the deeming provisions regarding accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal by taking the following grounds of appeal :- 1. On the facts and circumstances of the case, whether the Ld. CIT(A) was justified in deleting addition of ₹ 49,25,296/- made by the A.O. when the payment was made as kickbacks to Iraqi authorities as illegal payment within the provisions of Section 37(1) of I.T. Act and paid under the Oil for Food Programme of UNO and a CBDT Memorandum No.414/117/2005-IT (Inv,-1) dated 18.11.2005 read with Volcker Committee's Report which confirmed the illegality of the payments. 2. On the facts and circumstances of the case, whether the ld. CIT(A) was justified in admitting additional evidences in violation of Rule 46A when sufficient opportunities were provided by the A.O. to the assessee to file details. 3. The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of hearing of the appeal. The assessee filed cross objections by taking the following grounds :- 1. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred, both on facts and in law, in upholding reassessment order passed under Section 147 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion's Report mostly concerns politicians and others who are Public Servants in the eyes of law. It does not mention any illegality on the part of a private Indian party. Any bar imposed by UN on supply of goods to Iraq also cannot debar an Indian party to do so unless the restriction is imposed by the Government of India through a legal process. In the present case, there was no such restriction on supply of goods or materials to Iraq imposed by the Government of India. In any case, the records show that even these contingencies also did not arise in this case as neither the name of appellant company has been proved to have figured in the Volker Commission Report nor has the payment been proved to be of the nature of a kick-back nor even it has been shown that the necessary permission from UN was not taken. So far as the nature of the payment is concerned, it has clearly been established that the payment was made purely for the purpose of procuring export order of Forklift Trucks to Iraq and also certain after-sales services performed by the Agent in Iraq and was of the nature of commission payment. Similarly, in the case of DCIT vs. Rajrani Exports Ltd. reported in (2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittee report is taken as correct and this report is taken as an admissible evidence, will the deductibility of expenses in the hands of the assessee will be hit by Explanation to Section 37(1). However, to what extent this report can be relied upon in income tax proceedings is still an open question. We leave it at that. 21. In the result, the appeal is dismissed. The decision of ITAT, Calcutta Bench in the case of DCIT vs. Rajrani Exports has been upheld by Hon'ble Calcutta High Court in ITA No.49 of 2013 dated 24th April, 2013 as under :- The question suggested by the Revenue is as follows: Whether on the facts and in the circumstances of the case the Tribunal was justified in law to dismiss the appeal of the revenue by confirming the order of the CIT(A) on account of disallowing the commission payments in view of Explanation to Section 37(1) of the said Act. Against the order of the Assessing Officer, the assessee preferred an appeal before the CIT(A), who in his order allowing the appeal, held as follows: It is observed that the commission on export activity had been fully disclosed in all correspondences and activities in relation to export, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case M/s. Air Pac Exports vs. ACIT in ITA No.2981 2983/Mum/2012 dated 11th June,2014 has also deleted the addition made on the similar facts as under :- Commission payments to third party, not to Iraq Govt, under export contract signed under United Nations Food for Oil Programme , not hit by Explanation to Sec. 37(1); AO's reliance on Volcker Commission's report incorrect as it prohibited illicit commission payments to Iraq Govt., while in present case payments were made to third party and not to Iraq Govt.; No finding that third party had rendered services and commission paid to third party was diverted to Government of Iraq, thus directs AO to delete disallowance; Relies on co-ordinate bench ruling in NSIL Exports Ltd as squarely applicable to present case. In the case of NSIL Exports Ltd. vs. DCIT in ITA No.3050-3/Mum/2013 dated 21.02.2014, the ITAT, Mumbai Bench has also deleted the addition on similar facts by holding as under :- Disallowance on transport and commission expenses - illicit payment to the Saddam Hussain regime - Held that:- The obligation of the transportation of the goods from ports to the destination is on the part of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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