9911796707
TMI Blog2004 (5) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... actors and motor cycles in the Ahmedabad District and Mehsana District. The assessee has head office at Ahmedabad and Branch at Mehsana. He stated that the AO has recorded his finding in detail in asst. yr. 1991-92 and the same finding is followed in the other years and, therefore, the facts and the finding given in asst. yr. 1991-92 would be discussed which would be applicable for other years also. That the AO while scrutinising the assessee's case for asst. yr. 1991-92, found that the assessee has claimed an expenditure of Rs. 64,739 for Mehsana office. In addition, he has claimed the payment of commission to NCT,-Rs. 2,32,375 and Rs. 3,63,000 to TSC. On examination of agreement with NCT, the AO found that as per cl. (2) of the agreement NCT was to maintain an upto date workshop and carry out the PDI for tractors and motor cycles, installation of tractors and service. Similarly, as per agreement with TSC they have to maintain the sales office at their cost. In view of above, the AO found that the assessee has outsourced the work of sale of the tractors and motor cycles to one party and of servicing to other party. Thus, there was no necessity to maintain the office by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Mehsana office the assessee has not appointed any technical person or staff and the entire technical work of the installation of tractors, servicing of tractors, servicing of motor cycles, etc. was being done by NCT. He pointed out that since the assessee is the agent of Escorts Ltd. for Mehsana District, it has to maintain the office and godown for keeping the stock of tractors, motor cycles and their spare parts. However, for the entire work technical persons are provided by NCT. Similarly, the staff for sale of tractors were provided by TSC. This fact is evident from the details of expenditure of Mehsana office given by the AO on p. 5 of the assessment order. That total claim for salary was Rs. 17,014 which was paid to chowkidars, i.e., watchmen. That the tractors are sometimes stored in the open land adjacent to the office and, therefore, the assessee has to engage watchmen for 24 hours. The salary was paid to the watchmen. No other staff was employed by the assessee. He further submitted that the AO has disallowed the commission to NCT on the basis of statement of Shri Nitin G. Patel. That the above statement was recorded behind the back of the assessee and moreover, subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and perused the material placed before us. Our finding with regard to each issue in dispute is as under: (i) Disallowance of loss of Mehsana office 6. The AO has given the details of the expenditure at p. 5 of the assessment order. The same is reproduced below: Salary 17,014.10 Office rent 5,172.00 Staff Bonus 2,818.00 Office mun. tax 1,596.00 Plate number 2,809.00 Bldg. repairs & maint. 7,733.40 Depreciation 21,252.00 Bank commission 38.00 Office expenses 711.00 RTO exps. 2,050.00 Subscription 51.00 Incentive allowance 1,096.00 Diwali boni 300.00 Entertainment 110.00 Workshop board exps. 1,989.00 Total 64,739.50 It was explained by the learned counsel that salary and bonus was paid to watchmen. Apart from above, the major expenditure was for office rent, building repairs, depreciation, etc. It may be pointed out that the assessee has business premises—one in his own building and the other in the rented premises. Apart from the above expenditure no other major expenditure was incurred. Even though the work of sale and after-sale services was outsourced, the assessee has to maintain the office and godown and, therefore, the above expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (i) The above statement was recorded behind the back of the assessee. (ii) Shri Nitin G. Patel was partner of TSC and, therefore, he has no authority to make any statement on behalf of NCT. (iii) That the statement given by Shri Nitin G. Patel was retracted by him by filing the affidavit. It was also pointed out by the learned counsel for the assessee that the payment of commission to NCT was allowed from asst. yrs. 1984-85 to 1990-91, 1994-95, 1996-97 and 1997-98. Considering the totality of the above facts, in our opinion, the amount paid to NCT was though named as commission, it was the servicing charges paid to them for the services rendered by them for the purpose of assessee's business and, therefore, the same is rightly allowed by the CIT(A). (iii) Regarding payment of commission to M/s Tractor Sales Corporation 8. The payment is made as per agreement dt. 9th April, 1990, between the assessee and TSC. The preamble to the agreement reads as under: "Party of the first part shall supply tractors to the party of the second part and it has been agreed that on selling said tractors by the party of the second part, the party of the first part will pay a commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration, the assessee has shown sales of Rs. 17,52,852 on which GP of 16.4 per cent was disclosed. The AO rejected the books of account on the ground that the relevant records were not produced before him and estimated the sale at Rs. 20 lakhs, and has adopted the GP rate of 20 per cent which resulted in the addition of Rs. 72,000. It is explained before us that the records could not be produced before the AO because there were destroyed in the fire took place during the riots. It was also pointed out that the fact of fire is not in dispute. Even the insurance authority has allowed the insurance claim for loss of stock. It was also pointed out that the GP disclosed by the assessee is better than the GP in most of the preceding years. We find that the CIT(A) has given the comparative figures for the GP of preceding four years which read as under: Asst. yr. GP percentage 1979-80 15 % 1980-81 14 % 1981-82 14 % 1982-83 18.5 % We find that except in the immediately preceding year, the GP in all the three earlier years was less than the GP disclosed in the year under consideration. When the relevant records were destroyed in the fire, the assessee could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small labourers who had no bank accounts. Therefore, the payment was covered by the exceptional circumstances as provided in r. 6DD(j) of the IT Rules. The above finding of fact recorded by the CIT(A) could not be controverted before us. We, accordingly, accept the same and reject the ground No. 5 of the Revenue's appeal. 13. The assessee's appeal for asst. yr. 1983-84 vide ITA No. 3448/Ahd/1995 was not pressed by the learned counsel for the assessee at the time of hearing before us. Accordingly, the same is rejected. 14. With regard to CO Nos. 4 and 5 also it is stated by the learned counsel that the assessee does not want to press these cross-objections. Accordingly, CO Nos. 4 and 5 are also rejected as not pressed. CO No. 164/Ahd/2002 15. In this cross-objection, the only ground raised by the assessee reads as under: "1. That the CIT(A) has erred in not allowing the loss of Rs. 1,51,554 occurred on account of fire in communal riots in the asst. yr. 1993-94. 2. The appellant submits that the CIT(A) has wrongly dismissed the ground and begs that the loss of Rs. 1,51,554 may be allowed." We have heard both the parties and perused the material placed before us. During ..... X X X X Extracts X X X X X X X X Extracts X X X X
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