2016 (6) TMI 584 - AT - Income Tax

Disallowance of commission - assessee was claiming the commission expense on the basis of orders procured by commission agent but Authorities Below did rejected the same on the ground that commission expense which are corresponding to the sales made during the year should be allowed as deduction in the year under consideration - Held that - We find force from the argument of Ld. AR that no such disallowance was made in earlier years and expenses were duly claimed in its books of account after getting the bills from the concerned parties and after TDS deduction. We find that services rendered by commission agents have not been doubted by the Authorities Below. We further find that assessee s claim of commission expense on the basis of bills raised by commission agents for the value of orders arranged by them consistently and these were allowed in the past years also. We also find that assessee having the arrangement with the commission agent for procuring the orders from the Electricity Boards and once the order has been arranged then the commission agent is entitled for the commission on the value of such order arranged by him. In this point of argument, Ld. DR has not brought anything on record to controvert the argument raised by Ld. AR. - Decided in favour of assessee. Disallowance of deduction u/s 80G of the Act on account of donation - Held that - Ld. CIT(A) has disallowed the donation on the ground that assessee failed to submit the exemption certificate issued to the institution registered u/s 80G of the Act by the Competent Authority. However, Ld. AR drew our attention on page 73 of the paper book where the certificate issued by Competent Authority u/s. 80G(5) clause (iv) to the institution was placed along with PAN No. Accordingly, we are inclined to reverse the orders of Authorities Below - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of commission expense on sales not made during the year.
2. Disallowance of deduction under section 80G of the Income Tax Act.

Analysis:

1. Disallowance of Commission Expense:
The case involved appeals arising from the order of the Commissioner of Income Tax (Appeals)-XX, Kolkata, regarding the disallowance of a commission expense of ?24,37,169 on sales not made during the year. The Assessing Officer disallowed the excess claim of commission expense on the grounds that it should be booked in the year when related sales are recorded. The Appellate Tribunal noted that the commission expense was based on orders procured by agents, paid through account payee cheques after deducting TDS. The Tribunal found that the services rendered by the commission agents were not doubted, and the expenses were consistently claimed in previous years. The Tribunal held that the commission expense should be allowed as a deduction since no disallowance was made in earlier years, and the expenses were duly claimed in the books of account. The Tribunal reversed the decision of the lower authorities and allowed the ground of the assessee's appeal.

2. Disallowance of Deduction under Section 80G:
The second issue pertained to the disallowance of a deduction of ?5,100 under section 80G of the Income Tax Act on account of a donation. The Commissioner of Income Tax (Appeals) had disallowed the donation due to the assessee's failure to submit the exemption certificate issued to the institution registered under section 80G. However, the Tribunal observed that the certificate issued by the Competent Authority under section 80G(5) to the institution was available in the record. Consequently, the Tribunal reversed the decision of the lower authorities and allowed this ground of the assessee's appeal.

In conclusion, both appeals of the assessee were allowed by the Appellate Tribunal, emphasizing the consistency of claiming expenses, the legitimate nature of the commission expense, and the availability of necessary documentation to support the deduction under section 80G.