2013 (5) TMI 410 - HC - Income Tax

Disllowance of commission payments in view of Explanation to Section 37(1)- CIT(A) ITAT allowed the claim stating that assessee has made payment for commission and has been rendered services in consideration of the same The fact that services have been rendered by a party other than the agent to whom commission is paid is wholly immaterial so far as deductibility in the hands of the assessee is concerned - Held that - The department appeal could not satisfy as to why were the findings as recorded by the CIT(A) and the Tribunal incorrect either on fact or in law. There is, as such, no reason why the appeal should be entertained. Against revenue.

Summary

Issues: Condonation of Delay, Disallowance of Commission Payments

Condonation of Delay:
The judgment begins by addressing a delay of 90 days, with the senior advocate for the assessee-respondent not opposing the prayer for condonation of delay. The court allows the condonation of delay but cautions the department to be more careful in the future. The judgment refers to a previous case involving the Office of the Chief Post Master General & Ors. vs. Living Media India Ltd. & Anr., emphasizing the importance of cooperation in such matters.

Disallowance of Commission Payments:
The main issue raised by the Revenue is whether the Tribunal was justified in dismissing the appeal regarding the disallowance of commission payments under Section 37(1) of the Income Tax Act. The CIT(A) allowed the appeal of the assessee, highlighting that the commission payments were fully disclosed, made through approved channels, and for legitimate business purposes. The CIT(A) found no illegality in the payments and noted the lack of evidence to suggest the transactions were non-genuine or excessive. The Tribunal upheld the CIT(A)'s decision, emphasizing that services were rendered in exchange for the commission payments, and the commercial expediency of the payments was crucial. The Tribunal concluded that the objections to the commission payments were not sustainable in law for deductibility under Section 37(1).

In the appeal before the High Court, the advocate for the department failed to demonstrate any factual or legal errors in the findings of the CIT(A) and the Tribunal. Consequently, the High Court dismissed the appeal, affirming the decisions of the lower authorities regarding the deductibility of the commission payments.

In conclusion, the judgment addresses the issues of condonation of delay and the disallowance of commission payments under the Income Tax Act. The court emphasizes the importance of cooperation in procedural matters and upholds the decisions of the lower authorities regarding the legitimacy and deductibility of the commission payments made by the assessee.