TMI Blog2021 (4) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... that the commission paid by the assessee was on account of commercial expediency. If there was evidence that sales increased due to effort of the commission agent and that the commission paid was reasonable and the commission was held to be deductible as has been held in in the case of Voltamp Transformers Pvt. Ltd. [ 1980 (10) TMI 35 - GUJARAT HIGH COURT] Assessee has very well entered into an agreement for payment of commission both with foreign agent as well as domestic company for the purpose of assessee s business, which were duly signed and accepted by the respective parties. Not only agreement, the assessee has also furnished copies of commercial Invoice, confirmation of Accounts, copy of Form 15CB in the case of foreign party, for non-deduction as they do not have an office in India, in the case of Indian Company, TDS was deducted, copies of Bank Statement to establish that the payment were made through Banking channel, purchase order copy, copies of sale invoices for commission paid to M/s. Poushali Sales (P) Ltd., copies of Shipping Bills in case of Exports Orders, Service Tax Registration Service tax payment, audited financials of M/s Poushali Sales (P) Ltd., with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved, the Revenue is in appeal before Tribunal. By relying on the grounds of appeal, the ld. DR has submitted that the ld. CIT(A) has erroneously deleted the addition on account of disallowance of commission payments by holding that the Assessing Officer ought not to have taken an adverse inference on it. It was further submission that the assessee has failed to submit any documentary evidences to prove the genuineness of claim and actual services rendered by foreign agent. On the other hand, besides supporting the orders of the ld. CIT(A), the ld. Counsel for the assessee has submitted that the assessee has furnished all relevant documentary evidences such as agreement, export shipping bills, etc. to prove the genuineness of the claim and actual services rendered by foreign agent and prayed for sustaining the appellate order. 4. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. The assessee is engaged in the business of manufacturing and supplying fabricated steel parts for telecom towers, solar power companies and transmission line and has been exporting tower par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has got wide powers to verify the transactions, but no effort has been made to make any enquiries. There is no documentary evidence in support of the contention of the Assessing Officer. The Assessing Officer has made guess that the credentials are not established. The other Indian Agent, whose financials were submitted were also not verified nor any attempt to enquire about it were made. (3) The Appellant submits that if he would not have paid commission, he would not have secured order and to that extent the income would have been lesser. As per- the matching concept of Income Expenditure, the Assessing Officer cannot just disallow the expenditure and tax the income, In case the Assessing Officer disallows the commission, the income earned subsequent to disallowance of commission is to be reduced from the total income. The net effect is also not beneficial to revenue, as the tax effect will be reduced. (4) The Appellant had furnished the documentary evidences as mentioned above to establish the nexus between income and expenditure. However the Assessing Officer has neither made any third party enquiry not brought any documentary evidences or contrary m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on record. It was submitted that the AO could not have such opinion based on Google Search that it is unbelievable that the M/s. Amikong Pte Ltd could not have procured such business. It is a fact on record, Mr. Nitin Goel, Director of the appellant company had earlier visited Singapore personally and discussed the deal with M/s. Amikong Pte Ltd to acquire the additional business from Myanmar. It was argued that the appellant succeeded in generating sufficient revenue, for which the commission has paid. It was argued that the AO could not dictate terms that the appellant is required to do business based on Google Search and it is for the appellant to evolve the mechanism to generate more revenue and if there were any deficiencies in the Google Search engine, the appellant ought not to have been penalised for the same. Further the AR also argued that the AO could not have stated the percentage is on the higher side as it is for the business man to decide what percentage of commission is to be paid. The AR further argued that the AO on the one hand has disallowed the commission paid to M/s. Amikong Pte Ltd as exorbitant being 12.5% and on the other hand has also disallowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to ordinarily maintain in the course of business to substantiate the genuineness of the payments. The terms and conditions of these arrangement as well as the obligations were agreed in writing vide a duly executed agreement, copy of which was even part of the assessment (Page 5, 6 7 of the assessment order). Under these circumstances, the onus shifts to the Assessing Officer to establish the genuineness, in case the Assessing Officer doubts the The Assessing Officer made huge addition without even making any third party enquiries. The Assessing Officer has disallowed the commission payment on flimsy ground that certain documents which are required as per the Assessing Officer were not furnished. There is no other finding recorded by the Assessing Officer in his order. Further, the parties to whom the payments were made are not associates or related enterprises of the Appellant. It is a purely a case of two unrelated entities that conducted a service transaction and the considerations were exchanged at the same time. ix. It was submitted that the Assessing Officer is not competent to step into the shoes of the businessman. It is not for the Department to sit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat extent. Further, it has argued that as the earning of such income and expenses are interlinked and as the commission was wholly and exclusively for earning income, the same is allowable. xi. The appellant submitted that the Assessing Officer has stated that the credentials of M/s Amikong Pte Ltd., are not proved by the appellant and it is unbelievable that the agent has procured orders and was not realistic in the absence of evidence substantiating the involvement of M/s Amikong Pte. Ltd. This contention of the Assessing Officer and inference of the Assessing Officer is not legally tenable in view of the following grounds: a. The Appellant is a corporate having turnover of ₹ 290 Crs, out of which the above party has given export order of ₹ 20 Crs. All that the businessman is interested is that sufficient business is and commission is paid for the same. At the end, the Appellant has earned sufficient income from the transaction and there is no net loss from the transaction. The credentials are to be verified if any loans or advances are made and not required to verify the credential of the agent whom the commission is paid as per agreed terms. Further the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Corroboration, Circumstantial and Substantial evidence have its own value based on the particular situation in which that evidence is used and also based on the law in which the court is deciding. There is no any hard and fast rule that the particular evidence is more valuable in the matters of Taxation Laws. All these evidences have its own persuasive value in the proceedings, which is before an assessing authority. The appellant further submitted that it could not understand as to what is substantial evidence of commission agent as required by the AO. In commission agency business, contract can be entered into or it can be verbal contract but bill must be required from the agent for the supply made to the parties referred by them in order to pay commission. The agent is responsible for collection, etc. It is not mandatory to mention any name of agent in purchase order received from customers. The AR argued that as per law, contract can be even an oral contract and in the case under consideration there is a written contract and therefore the case of the appellant is on a much better footing. Even assuming that, if certain clauses were not included in the agreement as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the AO had taken adverse inference for payments made to M/s. Poushali Sales Pvt Ltd in spite of the fact that the payments have been made through banking channels after duly deducting TDS and the said company has declared the commission revenue both to the service tax department and the Income Tax Department as per the respective returns filed. It was further argued that when the Service Tax Department and Income Tax Department has accepted the transactions in the hands of M/s. Poushali Sales Pvt Ltd, there is no justification for the AO to have taken an adverse inference especially when the payment of commission was just around 1%. xvi. The Appellant submits that the commission paid is not very high as compared to profits earned. It was a legitimate business expenditure which has not been doubted and it has resulted in high profit because of services rendered by the persons. There was evidence on record to establish the trade practice of giving commission for procuring new business could not be considered to be unreasonable are excessive. It was submitted that the payment of commission was made to the commission agent through proper banking channel and it was for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee with the above companies in Myanmar was neither fake nor disputed by the Assessing Officer since the assessee has produced the export shipping bills of the Myanmar customers where the goods have been dispatched and on the supply commission was paid through banking channel after obtaining 15CB from the auditor. It is clear from the above that M/s. Amikong Pte Ltd., the commission agent has introduced new customers to the assessee, procured export order and accordingly the assessee carried out the business. 4.4 Generally no direct evidence for the service rendered can be produced and the relationship of the service rendered and business purposes has to be established by circumstantial evidence and growth in the business of the assessee in such cases. In this case, as per the matching concept of taxation, both the commission Agents have given sufficient business. Foreign Agent has given export orders of ₹.22.Crs and local agent has procured orders for Reliance Jio Info Comm Ltd. for the extent of ₹. 60 crores, by which revenue has increased from ₹.2.72 Crs to ₹.6.36 Crs. Thus, there is a direct nexus between the income generated and the com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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