2009 (12) TMI 1052 - AT - Income Tax

Summary

Issues Involved:
1. Partial disallowance of commission paid to the sole selling agent by the assessee.
2. Deletion of substantial portion of the disallowance by the CIT(A).

Summary:

Issue 1: Partial disallowance of commission paid to the sole selling agent by the assessee.

The assessee contested the CIT(A)'s decision to sustain a partial disallowance of Rs.7,50,482/- out of the commission paid to its sole selling agent, M/s. L.G. & Doctors Associates Pvt. Ltd. ("LGDA"). The assessee argued that the sole selling agency agreement, executed on 25-10-1988, was genuine and had been consistently accepted by the department in previous and subsequent assessment years. The assessee maintained that the services rendered by LGDA were legitimate business expenses. The Tribunal found that the Revenue had not provided sufficient evidence to discredit the agreement or the services rendered by LGDA. Consequently, the Tribunal deleted the partial disallowance of Rs.7,50,482/- sustained by the CIT(A).

Issue 2: Deletion of substantial portion of the disallowance by the CIT(A).

The Revenue appealed against the CIT(A)'s decision to delete a substantial portion of the disallowance made by the assessing authority, which initially disallowed Rs.1,27,57,505/-. The CIT(A) found that LGDA had rendered sufficient services to justify the commission, except for Rs.7,50,482/- related to direct sales made by the assessee to eight parties. The Tribunal upheld the CIT(A)'s decision, noting that the sole selling agency agreement had been consistently accepted in previous and subsequent assessments. The Tribunal concluded that the Revenue had not met the burden of proof to discredit the agreement or the services rendered by LGDA. Therefore, the Tribunal dismissed the Revenue's appeal.

Conclusion:

The appeal filed by the assessee is allowed, and the appeal filed by the Revenue is dismissed.