2013 (5) TMI 541 - HC - Income Tax

Payment of commission to relatives for the services rendered by them for promoting sales. - genuineness of commission - held that - the parties had sent confirmation of having received the commissions directly to the Assessing Officer, complete details of month-wise commissions were filed whenever TDS provisions were applicable, tax was deducted - Commissioner (Appeals) and the Tribunal concurrently on the basis of the appreciation of evidence on record held that the payment of commission was genuine and proper. The necessary evidence and justification for such commission payment was on record. - deduction of commission allowed - decided in favor of assessee.

Summary

Issues:
1. Addition of commission paid to related parties.
2. Addition of interest income on advances made by the assessee.

Analysis:

Issue 1: Addition of commission paid to related parties
The first issue pertains to the addition of Rs.33.33 lakhs made by the Assessing Officer towards the commission paid to related parties. Despite the assessee's explanation that the commission was paid for services rendered by parties associated with the company since its inception, the Assessing Officer made the addition. The CIT (Appeals) examined the evidence and deleted the addition, noting that the commission agents were assessed to income tax and TDS was deducted when required. The Tribunal upheld the CIT (Appeals) decision, stating that the parties confirmed receiving the commissions, details were provided, and TDS was deducted as necessary. The High Court agreed with the lower authorities, finding no perversity in their conclusions, as the evidence justified the commission payments. Therefore, the Court held that no question of law arose in this regard.

Issue 2: Addition of interest income on advances made by the assessee
The second issue involves the addition of Rs.16,62,000 as interest on advances made by the assessee-company to certain concerns where the Directors had interests. The CIT (Appeals) observed that the assessee had sufficient funds of over Rs.7.38 crores from share capital reserves and surplus, on which no interest was incurred. The Commissioner concluded that the assessee had ample funds to provide interest-free advances and did not use borrowed funds for such purposes. The Tribunal upheld the CIT (Appeals) decision, based on an evaluation of the evidence and material on record. The High Court concurred with the lower authorities, stating that since both authorities found that interest-bearing funds were not utilized for interest-free advances, no question of law arose. Consequently, the Tax Appeal was dismissed by the High Court.

In conclusion, the High Court upheld the decisions of the lower authorities in both issues, emphasizing the importance of evidence and proper justification for financial transactions. The judgment highlights the significance of factual findings and the absence of legal issues in the present case.