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TMI Blog2023 (6) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ce research and was awarded contract to supply special paints for "Mission Mars". For the Assessment Year 2013-14, the assessee filed its Return of Income declaring total income of Rs. 2,06,00,640/-. 2.1. The return was selected for scrutiny assessment. The assessee claimed expenditure of Rs. 3,65,28,194/- under the head "commission expenses". The Assessing Officer held that the assessee could not able to prove its claim of the commission expenses for the purpose of business. Thus the A.O. restricted the commission to the minimum rate of 2% of the total sales of Rs. 82,37,22,753/- as claimed by the assessee relating to four parties. The A.O. also made a disallowance of Rs. 5,27,881/- on account of payment made to an unapproved Gratuity Fund. 3. Aggrieved against the same, the assessee filed an appeal before Ld. NFAC. The Ld. NFAC deleted the addition made by the Assessing Officer observing as follows: "5.2. The appellant has argued that argued that none of the dealer is related party or is relative as per definition given in Section 40A (2) (b) of the Act. The commission rate is fixed prior to order placed and it varies from order to order, parties to parties as it depends upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, conveyance and welfare expenses of staff etc. and many such expenses of branch office is totally saved in the bargaining, apart from saving of expenses the commission is paid only after realisation of sales proceeds from customers, in case the sales proceeds are not realised, the entire bad debts are also recovered from them. The appellant has further submitted that the average rate of commission paid calculated by the Ld AO in the assessment order paid to four parties ranging from 2% to 15% is incorrect. The appellant has argued that based on these erroneous working e. 15% rate of commission paid, the Ld. Addl. Commissioner had directed to allow only 2% of total sales as reasonable commission. However, the appellant has submitted that the average rate of commission paid is only 2.75 % to 6.75% and same being genuine, reasonable, the addition made based on the erroneous working needs to be deleted. 5.3. The facts of the case are considered. The appellant's contention that none of the dealer is related party or is relative as per definition given in Section 40A (2) (b) of the Act and the fact that the commission is paid by cheque and TDS is deducted & paid, are conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and in law, Ld.CIT(A) was justified in deleting the addition of Rs.2,00,53,739/- made by the AO on account of restricting the commission expenses to 2% without appreciating the fact that the assessee could not provide the basis of debiting commission expenses which were not corresponding to monthly sales." 1.1"Whether on the facts of the case and in law, Ld.CIT(A) was justified in deleting the addition of Rs.2,00,53,739/- made by the AO despite the fact that the assessee could not establish with documentary evidences his own argument that the commission expenses differ on case to case basis, on customer to customer basis and on product to product basis." 2. "Whether on the facts of the case and in law, Ld.CIT(A) was justified in deleting the addition of Rs.5,27,821/- made by the AO on account of disallowance of gratuity paid toward the fund which was not approved by Income-tax authority". 3. The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal. It is prayed that the order of the CIT(A) on the above issues be set-side and that of the Assessing Officer be restored. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OATS AATFS939SA 8,94,38,793 56,54,266 6,25,067 50,29,199 No 5.62 16 SSY ENTERPRISES AFXPG6022L 1,36,99,281 9,06,516 9,06,516 No 6.62 17 SUPTHA MARKETING ACPPC.5083J 4730509 1,74,010 1,74,010 No 3.68 18 SYSTEMTRONICS INDIA APYPS6439J 1,57,44,047 10,63,263 10,63,263 No 6.75 19 TS ENTERPRISES AEVPG3962Q 1,34,86,633 8,88,499 8,88,499 No 6.59 20 UDWIPAN COATINGS AASPV1303K 81,27,419 3,63,632 3,63,632 No 4.47 21 URMIPVORA AEIPV6657A 2,18,17,942 9,76,165 9,76,165 No 4.47 22 Service Tax Credit for the year -34,83,782 Total 63,43,99,560 3,65,28,194 Commissioner % on sales through Bus. Asso. Minimum % 2.75 Maximum % 6.75 Average % 5.25 Total Sales as per P&L 82,37,22,752 Commission on Total Sales % 4.43 As per AO - 2% of Total Sales 1,64,74,455 Disallowance 2,00,53,719 6.1. Thus the Ld. Counsel submitted that the Commission paid to various parties is ranging from 2.75% to maximum of 6.75%. The Ld. Senior Counsel also further submitted none of the above 22 parties are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the basis of debit note received from dealers, the commission expenses is accounted in the books of the assessee company. The assessing officer also found that similar commission expenses which was paid by the assessee in the earlier assessment years is being accepted by the department and which is not disputed by the A.O. Thus taking into account, overall facts of the case, the Ld. CIT(A) deleted the addition made by the Assessing Officer on commission expenses. The Ld. D.R. appearing for the Revenue could not place on record any contra view. In the absence of the same, we have no hesitation in confirming the deletion made by the Ld. CIT(A) on account of commission expenses. Thus the Ground Nos. 1 and 1.1 raised by the Revenue are devoid of merits and the same are hereby dismissed. 9. Regarding ground no. 2, Gratuity amount paid towards a fund which was not approved by the Income Tax Authority. This issue is been settled by the Hon'ble High Court of Gujarat in the case of Valsad District Central Co-Op. Bank Ltd. Vs. ACIT reported in [2018] 92 taxmann.com 280 in favour of the assessee held as follows: "......10. In the present case, the petitioner had raised a claim and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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