2007 (6) TMI 192 - HC - Income Tax

Service charges (commission) paid by the assessee-firm to its sister concern - held that the commission paid by the assessee-company to its sister concern for the services rendered by it was allowable as deduction and the same cannot be interfered with - Tribunal was justified in following its own earlier order, which remained unchallenged while dismissing the revenue s appeal - no substantial question of law arises for our consideration - these revenue appeals are dismissed

Summary

Issues:
- Appeal against common order of Income-tax Appellate Tribunal regarding deduction on payment to sister concern for packing and forwarding charges.
- Disallowance of payment by Assessing Officer based on relationship between sister concern and assessee-firm.
- Commissioner of Income-tax (Appeals) allowing 90% of the payment.
- Tribunal dismissing Revenue's appeals based on earlier order and allowing commission as business expenditure.
- Questions of law regarding Tribunal's justification, basis for allowing commission, and consideration of services rendered.
- Comparison with similar cases CIT v. V. S. T. Motors P. Ltd. and CIT v. Print Systems and Products.

Analysis:
The High Court heard appeals against the common order of the Income-tax Appellate Tribunal concerning the deduction claimed by the assessee-firm for payment to a sister concern, Balaji Siva, for packing and forwarding charges for the assessment years 1986-87 to 1993-94. The Assessing Officer disallowed the payment under section 147 of the Income-tax Act, 1961, due to the relationship between Balaji Siva and the assessee-firm, suggesting the payment was to reduce profits rather than for actual services. The Commissioner of Income-tax (Appeals) allowed 90% of the payment, acknowledging services rendered by the sister concern but considering the close relationship between the managing director of Balaji Siva and the partners of the assessee-firm. The Revenue raised substantial questions of law challenging the Tribunal's decision to follow its earlier order and allow the commission as a business expenditure without delving into the actual services provided.

The High Court noted that the Revenue had previously allowed similar service charges paid by the assessee-firm to the sister concern for the assessment year 1994-95 without challenge. Citing precedents, the court referred to cases like CIT v. V. S. T. Motors P. Ltd. and CIT v. Print Systems and Products, where commissions paid to sister concerns were found reasonable and allowable as deductions. The court emphasized that since no material was presented to dispute the findings and decisions regarding service charges for the assessment year 1994-95, they were bound to follow the established precedents. Consequently, the court found no substantial question of law to consider and dismissed the appeals, along with associated costs, based on the existing legal principles and precedents.

In conclusion, the judgment upheld the Tribunal's decision to allow the commission paid to the sister concern as a business expenditure, relying on established precedents and the absence of contradictory evidence. The court's analysis focused on the consistency of decisions in similar cases and the lack of new material to challenge the findings, leading to the dismissal of the appeals without costs.