2014 (11) TMI 1156 - HC - Income Tax

Disallowing the claim for payment of commission made to the two parties on the basis of misconception of law or misreading - Held that - In the present case there is a binding contract between the parties by which the recipients of the commission had the right to enforce realisation of commission stipulated between the parties. We also find from the communication between the parties that the payment was duly received by the parties and paid by the assessee by account payee cheques. The revenue has not alleged that the parties to the transactions are related to each other or that the payments are not genuine or that the payments having been made by the assessee to the recipients have found their way back to the assessee some way or the other. Such being the case, we find that the authorities below were not justified in rejecting the claim of the assessee for payment of commission. Since all the ingredients necessary for genuine business transaction exist in this case, we do not find any merit in the addition made by the AO and in the action of the CIT(A) in confirming the same. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of the claim for payment of commission made to parties.
2. Validity of the order of the Income Tax Appellate Tribunal in allowing the commission paid by the Assessee company.

Analysis:
1. The High Court considered the appeal under section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal regarding the disallowance of commission payment. The Tribunal found a binding contract between the parties for commission payment, with evidence of payment received by the recipients through account payee cheques. The Court noted that the revenue did not prove any wrongdoing in the transactions, such as related parties or funds returning to the assessee. Citing previous judgments, the Court held that the authorities were unjustified in rejecting the claim, as all elements of a genuine business transaction were present. The appeal of the assessee was allowed based on these findings.

2. During the hearing, the appellant revenue and respondent assessee presented their arguments. The revenue failed to demonstrate that the payment was not made or that funds were returned to the assessee. The Court concluded that there was no basis for interference with the Tribunal's order. As a result, the Court dismissed the application and appeal, stating that no further questions required adjudication based on the circumstances presented.