2014 (8) TMI 391 - HC - Income Tax

Commission expenses u/s 40A(2)(b) Held that - The assessee paid total commission and disallowed considering it to be excessive - CIT(A) deleted the addition by judgment and order the Tribunal has restricted the disallowance - Tribunal has restricted the disallowances - Restrictions of disallowances are absolutely on appreciation of evidence and as based on factual aspects thus, no question of law arises for consideration Decided against Revenue.

Summary

Issues:
1. Disallowance of commission expenses under section 40A(2)(b) of the Income Tax Act for Assessment Years 2008-09 and 2009-10.

Analysis:
Issue 1: Disallowance of Commission Expenses
The appeals arose from a common judgment by the Income Tax Appellate Tribunal (ITAT) regarding the disallowance of commission expenses under section 40A(2)(b) of the Income Tax Act for the Assessment Years 2008-09 and 2009-10. The assessee, a proprietor of a marketing firm, declared income for AY 2008-09 of &8377; 10,45,520. The Assessing Officer (AO) disallowed a substantial commission payment of &8377; 40 lac to the assessee's brother, considering it excessive and unjustifiable. The AO added this amount back to the total income. The Commissioner of Income Tax (Appeals) (CIT(A)) allowed the appeal and deleted the addition. However, the ITAT partly allowed the appeal by restricting the disallowance to &8377; 5 lac instead of &8377; 40 lac. In a similar case for AY 2009-10, the AO disallowed &8377; 37,67,708 as excessive commission expenses out of a total of &8377; 49,67,708. The CIT(A) deleted this addition, but the ITAT restricted the disallowance to &8377; 4.50 lac. The Revenue challenged these decisions in separate Tax Appeals. The High Court dismissed the appeals, stating that no questions of law arose as the decisions were based on factual aspects and evidence on record. The Court upheld the ITAT's decision to restrict the disallowances based on factual considerations.

In conclusion, the High Court upheld the ITAT's decision to restrict the disallowance of commission expenses for both Assessment Years 2008-09 and 2009-10. The Court found no legal errors in the ITAT's factual assessment and dismissed the Revenue's appeals accordingly.