TMI Blog2022 (4) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred by the assessee wholly and exclusively for the purpose of its business and; that the same is not in the nature of a capital expenditure; nor an expenditure incurred in the personal field; nor an expenditure incurred for any purpose which is an offence or prohibited by law. Interestingly, we find that not only both the lower authorities had by erroneously referring to the benefit test disallowed the assessee s claim for expenditure, but most surprisingly and rather beyond comprehension had restricted the said claim for deduction in the same ratio i.e., 5.44% in which sales for the year under consideration had witnessed an increase as in comparison to that of the immediately preceding year. We are unable to comprehend much the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed against the order passed by the CIT(Appeals)-1, Raipur, dated 29.06.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short the Act ), dated 06.03.2016 for assessment year 2013-14. Before us the assessee has assailed the impugned order on the following solitary ground of appeal: 1. Ld. CIT(A) erred in confirming disallowance of ₹ 8,29,120/- made by the AO on account of commission to agents, without appreciating the facts of the case properly. The disallowance was made by the AO on extraneous reasons. The disallowance made by the AO and confirmed by the CIT(A) is arbitrary, illegal and not justified. 2. Succinctly stated, the assesee firm which is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer rejected the explanation of the assessee that the comparative increase in the commission expenses during the year was primarily for the reason that marketing activities were also undertaken by the agents to secure sales/business. After rejecting the aforesaid claim of the assessee the Assessing Officer restricted the increase in the commission expenditure in the same ratio i.e, in which the sales for the year under consideration had increased as in comparison to those of the immediately preceding year i.e., A.Y 2012-13. Accordingly, the Assessing Officer restricted the assessee s claim for deduction of commission expenditure to ₹ 2,10,880/- and disallowed its claim for deduction of the balance amount of ₹ 8,29,120/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties i.e., the agents, but the expenditure had been disallowed by the Assessing Officer for the reason that no evidence of service received by the assessee which would have resulted in improvement of its business is discernible from records. 7. We have given a thoughtful consideration to the aforesaid issue in hand, and are unable to persuade ourselves to subscribe to incongruous basis adopted by the lower authorities for disallowing the assessee s claim for deduction of commission expenses. As is discernible from the record, the assessee in the course of the proceedings before the CIT(Appeals) had placed on record confirmations of the commission agents as additional evidence , which were admitted by him. On a perusal of the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities, which we would not hesitate to observe is nothing short of an arithmetical formula adopted by the Assessing Officer for partly declining the assessee's claim for deduction of commission expenses. Although a steep rise of an expenditure during a year would raise serious doubts as regards the genuineness of the claim for deduction of the same by the assessee, but then, as observed by us hereinabove, the allowability or not of the same has to be tested as per the mandate of Section 37 of the Act; and not on the touchstone of satisfaction of the benefit test as had been done by the A.O in the present case. Backed by our aforesaid observations, we are of the considered view that as the disallowance of the assessee s claim f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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