2019 (3) TMI 1845 - HC - Income Tax

Commission charged for providing bogus entries - Charging tax on activity at appropriate rate of commission for providing such service - adopted the rate of commission of 2% on the total turnover, which order the CIT (A) confirmed - Tribunal reduced the rate of commission to 0.15% - HELD THAT - Tribunal referred to its own decision in case of the Assessee's sister concern and held that the appropriate rate of commission should be 0.15% which is also admitted by the Assessee during search. The entire issue is based on facts. The estimation of the rate of commission of the Assessee would always be subject matter of some guesswork. No precise formula could be applied. Tribunal having taken into consideration the relevant factors, has arrived at a certain percentage of commission that any such kind of activities could be expected to be derived from. This does not give rise to any substantial question of law. Revenue also disputes the expenditure allowed by the Tribunal on such activities. - Decided against revenue.

Summary

Issues:
1. Dispute over the appropriate rate of commission for providing accommodation entry services.
2. Validity of reducing the rate of commission from 2% to 0.15% by the Income Tax Appellate Tribunal.
3. Allowance of expenditure by the Tribunal for the disputed activities.

Analysis:
1. The primary issue in this case revolves around determining the correct rate of commission to be charged on the turnover for providing accommodation entry services. The Assessing Officer initially set the rate at 2%, which was upheld by the CIT (A). However, the Tribunal later intervened and reduced the rate to 0.15%, citing a previous decision involving the Assessee's sister concern. The Tribunal considered factors and arrived at the revised percentage, which was also acknowledged by the Assessee during the investigation.

2. The High Court emphasized that the determination of the commission rate is a factual matter that involves some level of estimation and guesswork. Given the Tribunal's consideration of relevant factors and the absence of a precise formula for such calculations, the Court found no substantial legal question arising from the Tribunal's decision to lower the commission rate. Therefore, the Court dismissed the Revenue's challenge on this aspect.

3. Additionally, the Revenue contested the allowance of expenditure by the Tribunal related to the disputed activities. The Court, echoing its stance on the commission rate issue, reiterated that the Tribunal had appropriately considered the circumstances and factors involved in determining the expenditure. Consequently, the Court held that no legal question of significance emerged from the Tribunal's decision on the expenditure, leading to the dismissal of the Appeals.

In conclusion, the Bombay High Court upheld the Tribunal's decision to reduce the rate of commission for accommodation entry services and to allow the related expenditure, emphasizing the factual nature of such determinations and the Tribunal's consideration of relevant factors in arriving at its conclusions.