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Issues involved: Challenge to order by Income Tax Appellate Tribunal disallowing commission claimed by appellant for liaison work to sub-agents, legality of orders leading to potential double taxation, deduction claimed u/s 37(1) of the Act charged to tax in hands of payer despite being considered chargeable income in hands of payee.
Commission Disallowance: The appellant, a cement stockiest and sales promoter, received commission and claimed to have paid a portion as commission for liaison work to sub-agents. Assessing Officer disallowed the commission after detailed appraisal, leading to appeals. Tribunal allowed revenue's appeal, set aside CIT (Appeals) order, and rejected appellant's appeal due to failure to establish bona fides of payments to sub-agents. Legal Question: Appellant raised a question of law regarding deduction claimed u/s 37(1) of the Act being charged to tax in payer's hands despite being considered chargeable income in payee's hands. Tribunal held appellant failed to prove the nature of services rendered by sub-agents, indicating a fraudulent scheme to evade tax, leading to disallowance of claimed deduction. Tribunal's Decision: Tribunal analyzed evidence and statements, concluding that appellant did not satisfactorily establish incurring the expenditure for business purposes. The claimed liaison commission was disallowed based on lack of evidence regarding services rendered by sub-agents, with reference to past allowances and terms of agreements. Tribunal reversed CIT(A) order, confirming Assessing Officer's addition of the disallowed amount. Conclusion: The Tribunal's decision was upheld, dismissing the appeal as appellant failed to prove the legitimacy of commission payments, leading to disentitlement to relief. The question raised under Section 29 and 37(1) of the Act was deemed irrelevant due to lack of evidence and fraudulent nature of transactions. The appellant's claim was dismissed, affirming the disallowance of the commission. Judgment: The High Court upheld the Tribunal's decision, confirming the disallowance of the commission claimed by the appellant for liaison work to sub-agents. The appeal was dismissed, and the legal question raised by the appellant was deemed irrelevant in light of the lack of evidence and fraudulent nature of the transactions.
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