Pushp Enterprises , Jaipur vs Department Of Income Tax
- CitationITA No. 715/JP/2012
Ratio decidendi
The rule this decision rests on
The Tribunal holds that where an assessee has furnished confirmations from the commission recipients, shown that payment was made by account payee cheque, deducted tax at source, and shown that the recipient has been assessed to tax, the assessee has discharged its onus of proving that the commission expenditure was wholly and exclusively laid out for the purposes of business, and the disallowance under the Income Tax Act cannot be sustained on the mere ground that the commission agent refused to respond to a summons. The Tribunal further holds that commission paid in accordance with market practice and commercial expediency, supported by such material, is an allowable business expenditure, and that where the Revenue does not controvert the findings of the first appellate authority on that material, those findings may be upheld.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 715/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2004-05
The A.C.I.T. cuke M/s Pushp Enterprises, Circle-4, Jaipur Vs. H-780-A, Road No. 13, VKI Area, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFP 2279 F vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Ajay Malik, (Addl.CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar, (Advocate)
lquokbZ dh rkjh[k@ Date of Hearing : 25/11/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/01/2015
vkns'k@ ORDER
PER: T.R. MEENA, A.M.
This is an appeal filed by the revenue against the order dated
03/05/2012 passed by the learned CIT(A)-II, Jaipur for A.Y. 2004-05.
The sole ground of appeal is against deleting the addition of Rs.
12,29,368/- on account of disallowance of commission paid to M/s
Citizen Alloys & Pipes Pvt. Ltd..
2 ITA 715/JP/2012_ ACIT Vs. M/s Pushp Enterprises
2. The assessee is in the business of manufacturing, trading and job
work of bearing components. It is observed by the Assessing Officer
that the assessee had debited commission expenses in P&L account at
Rs. 12,29,368/- and Rs. 9,22,026/- to M/s Citizen Alloys & Pipe Pvt. Ltd.
and M/s Amba Polytube Pvt. Ltd. respectively whereas as per
confirmation from them, they had received the commission amounting
to Rs. 11,67,900/- and Rs. 8,75,924/- respectively. the Assessing Officer
gave reasonable opportunity of being heard on discrepancy found in
confirmation and commission expense debited. The assessee submitted
before the Assessing Officer that the appellant had contract with two
parties namely M/s Citizen Alloys & Pipe Pvt. Ltd. and M/s Amba
Polytube Pvt. Ltd. and they had agreed to work on behalf of the
appellant for procuring the order, get tested the material and payment
of the job work on behalf of the appellant. The appellant was paying
commission @ 2% to M/s Citizen Alloys & Pipe Pvt. Ltd. and 1.5% to
M/s Amba Polytube Pvt. Ltd. and claimed that both were protecting
appellant's interest in dealing with M/s SKF India Pvt. Ltd.. During the
year under consideration, the appellant had paid commission of Rs.
8,75,924/- to M/s Amba Polytube Pvt. Ltd. @ 1.5% on total sale of Rs.
6,14,68,400/- and Rs. 11,67,900/- to M/s Citizen Alloys & Pipe Pvt. Ltd.
The learned Assessing Officer held that the appellant had failed to 3 ITA 715/JP/2012_ ACIT Vs. M/s Pushp Enterprises
justify the services rendered by both the parties. He issued summons
U/s 131 of the Income Tax Act, 1961 (in short the Act) to M/s Amba
Polytube Pvt. Ltd. who had confirmed the commission payment of Rs.
9,22,026/- on total sale of Rs. 6,14,18,400/- whereas M/s Citizen Alloys
& Pipe Pvt. Ltd. had refused to receive the letter, which had to be
served through postal authority and same was returned back with the
postal remark "refused". Therefore, the learned Assessing Officer held
that commission payment to M/s Citizen Alloys & Pipe Pvt. Ltd. of Rs.
12,29,368/- was the expenditure not let out or expended wholly and
exclusively for the purpose of business and the assessee had failed to
discharge his onus to prove that the expenditure incurred was wholly
and exclusively for the business purposes. He relied upon the decision
of the Hon'ble Jurisdictional High Court in the case of Jaswant Trading
Co. Vs. CIT (1995) 212 ITR 24.
3. Being aggrieved by the order of the Assessing Officer, the
assessee carried the matter before the learned CIT(A), who had allowed
the appeal partly by observing that the appellant had filed confirmation
in respect of commission payment from both the parties namely M/s
Citizen Alloys & Pipe Pvt. Ltd. and M/s Amba Polytube Pvt. Ltd. vide
letter dated 29/11/2011. The appellant had explained the services
rendered by both the parties before the Assessing Officer, different rate 4 ITA 715/JP/2012_ ACIT Vs. M/s Pushp Enterprises
of commission was fixed with the parties as per contract. The learned
Assessing Officer allowed the commission in case of M/s Amba Polytube
Pvt. Ltd. The payment of commission was made to M/s Citizen Alloys &
Pipe Pvt. Ltd. through account payee cheque No. 514665 dated
27/03/2004 drawn on Punjab National Bank. The recipient also
assessed to tax with ITO, Ward-1, Sangrur, Punjab. The nature of
services rendered by it ranging from procuring order of job work,
quality control and timely payment from the principal was also
explained. The appellant could not have enforced the compliance of the
commission agent before the A.O after lapse of 7 years of transaction.
The appellant had also deducted TDS of Rs. 61,468/- on the
commission payment to M/s Citizen Alloys & Pipe Pvt. Ltd. He relied
upon the decision in the case of Mobile Communication (India) P. Ltd.
Vs. Deputy Commissioner of Income Tax (007 ITR Trib. 219). The
appellant firm had submitted complete details of commission payment
alongwith relevant material. The commission was paid as per business
practices and out of commercial expediency. The appellant firm had
duly discharged its burden to prove the genuineness of commission
expenditure. Therefore, he deleted the addition made by the Assessing
Officer.
5 ITA 715/JP/2012_ ACIT Vs. M/s Pushp Enterprises
4. Now the Revenue is in appeal before us. The learned D.R. argued
vehemently supported the order of the Assessing Officer. At the outset,
the learned A.R. for the assessee reiterated the argument made before
the learned CIT(A) and heavily relied upon the findings given by him.
5. We have heard the rival contentions of both the parties and
perused the material on record. The appellant had discharged his onus
by filing the confirmation, payment of commission through account
payee cheque, TDS has been deducted. The recipient is assessed to tax
in Sangrur, Punjab. The appellant paid this commission for business
expediency as per market practice. The learned DR has not
controverted the finding given by the learned CIT(A). Accordingly, we
uphold the order of the learned CIT(A).
6. In the result, the revenue's appeal is dismissed.
Order pronounced in the open court on 16/01/2015.
Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 16th January, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
6 ITA 715/JP/2012_ ACIT Vs. M/s Pushp Enterprises
1. vihykFkhZ@The Appellant- The ACIT, Circle-4, Jaipur
2. izR;FkhZ@ The Respondent- M/s Pushp Enterprises, Jaipur.
3. vk;dj vk;qDr¼vihy½@The CIT(A)-II, Jaipur.
4. vk;dj vk;qDr@ CIT, Jaipur
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 715/JP/2012)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@Asst. Registrar
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