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TMI Blog2016 (10) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... mission agent and details of commission were to be filed. On perusal of record it was observed that the assessee has paid commission even on supply to the Government Departments. For verification of genuineness of the commission claimed to be paid for supply of goods to Government departments, notices were sent to the Government Departments and notice u/s 133(6) of the Act was issued. The replies have been received from the department. It was informed by all these departments that no agent is required for facilitation of sale to them and purchases have been made directly from Kirti Industries, Indore, and the Assessing Officer has also reproduced the copy of reply received from various Government agents in paras 3 and 4 of the assessment order. The Assessing Officer has also verified from one Manju Enterprises, Gwalior, and it was found that Shri Hukum Singh Bhadoria was 72 years old and from Manju Enterprises the signature put by her in the ITR and the said letter was different. Therefore, the Assessing Officer has tried to verify as to whether she has received the commission or not. The Assessing Officer has also issued commission to Nirmala Enterprises, Jain Enterprises and Rakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was deputed to verify the facts who submitted the reports that the sign boards of the agents were not found at the premises and they were not available on the date of inspection. 2.4 However, it was claimed by the appellant that no opportunity was given to produce commission agents or cross examine them. The commission agents were called by the appellant at its own yet the A.O. did not cross examine them on 25th March instead of 24th March 2014. The various documents were furnished in support of services rendered by the agents yet the payment of commission was disallowed as the agents did not appear before him on the date fixed for hearing, 2.5 The appellant claimed that such sales were effected to MP State Co-operative Marketing Federation under a Scheme to promote cultivators for drip irrigation and to convince them for purchase of drip irrigation system. The state as well central govt. granted subsidy for purchasing such products by the cultivators and such subsidy is routed through Marketing Federation only. All the three organizations, in compliance to letters u/s 133(6) of I.T. Act, 1961 issued by the AO, confirmed that supplies were made by appellant company in F. Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity when such purchases are for the benefit of the public at large under subsidy schemes with the ultimate purpose of agricultural growth. The then CIT(A)-II, Indore, in order to verify the facts claimed by the appellant as above issued letters to all District Marketing Federations to whom supplies were made by the appellant to ascertain the services rendered by agents and genuineness of claim of commission. In response to such letters, all State Agro Industrial Development Corporations and Marketing Federations to whom supplies were made by the appellant' confirmed the names of commission agents as well nature of various services rendered by them on behalf of appellant. None of them have denied the necessity of different type of services required while effecting sales to the agriculturist such as to motivate the agriculturists, compilation of their requirements, submission of details relating to land records, preparation of case files, approval from Janpat Panchayat office, placement of supply order by M.P. Agro Industrial Dev. Corp., supply and distribution of pipes to cultivators at various destinations, transportation & installation thereafter, in the forms of the agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices. The Marketing Federations having directly confirmed the nature of services rendered by the agents and the payments being, neither excessive n o r unreasonable, the disallowance solely on the ground that no commission agent is required to facilitate the sales to the Federation or commission agents are not involved for such business activity is unjustified. The judgments relied upon by the appellant viz. CIT vs. Pure Pharrna Pvt. Ltd. (2004) 32 ITC 243 (MP), CIT vs. Electric Construction Equipment Co. Ltd 182 ITR 510 (Del) and Sanctus Drugs & Pharmaceutical Pvt. Ltd. vs. ACIT, Indore Bench (Supra), CIT vs. Rajratan Exports Pvt. Ltd. (2014) 361 ITR 152 (Cal) have also been found applicable to the facts of the case because in those cases also, the sales were made to Govt. Organization through tender yet the payment of commission was considered as exclusively for business purposes by the courts. Therefore after taking into account the above discussion and considering the overall facts and circumstances of the case, the inquiries made during appellate proceedings and the statements recorded during assessment proceedings for A.Y. 2012-13 the conclusion drawn by the AO, is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure towards loading, unloading, transportation and installation were incurred by the company. The Federation makes payment to the assessee company only after receipt of the subsidiary amount from the Government and commission agent has to continuously follow up for release of payment to the company. Therefore, the services of commission agents are required. Moreover, the assessee has earned Rs.86,71,739/- as additional income for supplying sprinkler to the Government organizations through these commission agents. Similarly, the assessee has also earned Rs. 58,21,853/- as additional income from sale of PVC pipes to Govt. Organizations. Therefore, after deducting the commission, the company has earned more revenue of Rs.1,44,93,632/-. All the payments to commission agents were made by cheque only after deducting TDS. The learned CIT(A) has in order to verify the genuineness of the commission and whether any payment has been made by M/s Kriti Industries and whether any commission agent is required for facilitation of sale had issued letters to all organizations. The Federation has replied to the learned CIT(A) that in order to promote micro irrigation scheme, the commission agents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutors and dealers. The assessee has appointed 7 commission agents who render extensive services not only for procuring the orders but also for continuous despatch of goods at various interior locations, inspection and expeditors release of payment from M.P. Government departments. During the year the assessee has effected sales to M.P. State Cooperative Marketing Federation under a scheme to promote cultivator for deep irrigation and to convince them for purchase of deep irrigation system. We also find that the State as well as Central Government granted subsidy for purchase of such product to cultivators through the market federation to promote agricultural activities in the country. The assessee and the agent have executed agreement which is at pages 7 to 27 of the paper book. All the agents have confirmed that they have rendered the services and also received the commission. All the commission agents are being assessed to income tax and they have deposited tax liability after claiming normal business expenditure for earning such business income. Such income has been disclosed by the agent and identity of the commission agent is proved. We find that the agents have rendered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 21st June, 2016 the Tribunal has held as under :- "6. I have considered the submissions of both the sides. Hon'ble High Court of Delhi in the case of Joint Investment Pvt. Ltd. (supra) has held as under :- "9. In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs.2,97,440/-as a disallowance under Section 14A had to be rejected. Taikisha says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO -an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., Rs.52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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