2012 (7) TMI 1024 - AT - Income Tax

Summary

Issues involved: Disallowance of commission payments u/s 40A(2)(b) of the IT Act for assessment years 2007-08 & 2008-09.

Summary:
1. The appeals were filed by the Assessee against the order of CIT-XVI (A), Ahmedabad, regarding disallowance of commission payments made to specified persons u/s 40A(2)(b) of the IT Act for the assessment years 2007-08 & 2008-09.

2. The Assessee, engaged in manufacturing, paid commissions to family members covered u/s 40A(2)(b) of the IT Act. The Assessing Officer disallowed a portion of the commissions paid, citing excessive payments to specified persons. The first appeal before CIT-XVI(A) upheld the disallowance due to lack of evidence of services rendered by the recipients.

3. The CIT (A) relied on legal precedents to confirm the disallowance, emphasizing the burden of proof on the Assessee to demonstrate services rendered by the commission recipients. The Assessee, in the subsequent appeal, argued that the commissions led to increased sales and were reasonable for the services provided.

4. The Tribunal upheld the CIT (A)'s decision, noting the Assessee's failure to provide concrete evidence linking the commissions to specific sales. The lack of documentation supporting the services rendered led to the dismissal of the Assessee's appeals for both assessment years.

5. Consequently, the Tribunal dismissed the Assessee's appeals for both assessment years, affirming the disallowance of commission payments made to specified persons covered u/s 40A(2)(b) of the IT Act.

Separate Judgement: None.