2013 (5) TMI 529 - AT - Income Tax

Disallowance of commission payment in respect of export - Held that - On examining the export invoices, it turns out that there is a clear mention of such commission on the very face of the export invoices that the commission on export to these two persons was deposited in their respective NRE accounts at the rates agreed in conformity with the Memorandum of understanding, substantiates the factum of the assessee having actually paid commission to these two parties at Rs. 35.37 lakh. Therefore, order for granting deduction to this extent. In favour of assessee. Commission on domestic purchases - Held that - It is a fundamental proposition that the onus of proving the rendering of services is on the assessee for a genuine claim of deduction on account of commission. As the assessee has failed to lead any evidence in respect of services provided by these persons no deduction can be allowed for a sum of Rs. 18.73 lakh as Commission on domestic purchases - Against assessee. Disallowance of Clearing and forwarding expenses u/s 40(a)(ia) - Held that - As assessee fairly admitted that no tax was deducted at source in respect of payments at Sr.nos.8 and 9 the disallowance u/s 40(a)(ia) was rightly made. As regards item at Sr.nos. 4 and 5, assessee pointed towards certain material showing that these parties obtained certificates from the Department for no deduction of tax at source as additional evidence & as regards item in Sr.no.10, the real character of this payment was of purchase and not payment of Clearing and forwarding charges relied on certain documents to indicate that this payment was towards some purchases was also filed through additional evidence - therefore remit the case for fresh decision - Partly in favour of assessee for statistical purposes. Disallowance of traveling expenses - Held that - As during the course of assessment proceedings assessee placed on record copies of invoices of M/s Perfect Tours and Travels showing payment of Rs. 2.70 lakh as an additional evidence, thus it would be in the interest of justice if restore the issue back to the file of A.O. for examining the deductibility or otherwise of Rs. 2.70 lakh in the light of the fresh evidence filed by the assessee - in favour of assessee for statistical purposes.

Summary

Issues:
1. Disallowance of commission payment
2. Disallowance of Clearing and forwarding expenses u/s 40(a)(ia)
3. Disallowance of traveling expenses

Issue 1: Disallowance of Commission Payment
The appeal involved the confirmation of disallowance of commission payment by the Commissioner of Income-tax (Appeals) in relation to the assessment year 2009-2010. The Assessing Officer observed a drastic increase in commission expenditure claimed by the assessee and raised concerns regarding lack of details and evidence for the payments made. The ITAT Mumbai analyzed the two types of commission payments - for exports and domestic purchases separately. For commission on exports, the ITAT found sufficient evidence of payments made to non-residents with NRE accounts, supported by agreements and banking transactions. Hence, deduction was granted for this amount. However, for the commission on domestic purchases, where no evidence of services rendered by the commission agents was provided, the ITAT upheld the disallowance as the onus of proving services was on the assessee.

Issue 2: Disallowance of Clearing and Forwarding Expenses u/s 40(a)(ia)
The second ground of appeal concerned the disallowance of Clearing and forwarding expenses under section 40(a)(ia) due to improper deduction of tax at source. The ITAT noted that in some cases, no disallowance was warranted as tax was deducted at a lower rate. However, for certain parties where no tax was deducted at source, the disallowance was upheld. The ITAT allowed additional evidence submitted by the assessee for certain parties and remitted the matter back to the Assessing Officer for fresh examination based on the new evidence. The ITAT emphasized that if the Department indeed issued certificates for no tax deduction and if certain payments were for purchases, no disallowance should be made.

Issue 3: Disallowance of Traveling Expenses
The final ground of appeal revolved around the disallowance of traveling expenses for lack of evidence. The Assessing Officer disallowed a specific amount for which no bill was filed. The ITAT noted that the assessee submitted invoices as additional evidence during the appeal. In the interest of justice, the ITAT set aside the earlier decision and directed the Assessing Officer to re-examine the deductibility of the amount in light of the new evidence submitted by the assessee.

In conclusion, the ITAT partially allowed the appeal, addressing each issue comprehensively and providing detailed reasoning for the decisions made, ensuring a fair assessment of the disputed expenses.