2022 (11) TMI 660 - AT - Income Tax

Addition on account of Sales Commission - Bogus Expenditure - Non-deduction of TDS u/s 194H or 192 - Payment of commission of employees as part of salary or otherwise - whether CIT-A erred in upholding the addition on account of Sales Commission paid to employees of the company being not directly relating to Sales Department? - HELD THAT - At the time of hearing, the learned counsel asked whether the appellant assessee has furnished detailed information regarding the nature of payments of the expenses claimed as sales commission and whether direct whether any TDS has been directed on such payments before the authorities below. Since the assessee has failed to furnish any information to establish that the payments were made towards the sales commission relating to promotion of sales and TDS the deduction on the sales commission thereof before the authorities below and in the present proceedings as well. Merely, the claim made by the assessee that the business of the Appellant is sales/purchase of liquor and all these employees are directly or indirectly related to sales of the company is not sufficient to hold that the findings of the authorities below are not tenable. In view of the matter, we do not find any infirmity or perversity in the observation and finding of the CIT appeal on the facts of the case. The order in the case of Subash Chander Co. 2009 (1) TMI 357 - ITAT AMRITSAR is not applicable to the facts of the present case of the assessee as in that case the Tribunal has dealt with the issue and genuineness and payments of 15% interest to the relatives u/s. 40A(2) whereas in the present case, the issue is claim of payment of sales commission against sales incentives paid as part of salary package to the employees of the assessee company without deducting TDS. Similarly, the judgment given by Hon'ble Apex Court in the case of S.A. Builders Lt vs. CIT 2006 (12) TMI 82 - SUPREME COURT on the issue of commercial expediency is of no help to the appellant assessee because, the issue involved is claim of sales commission without TDS deduction in violation of provisions of the section 194H of the Income Tax Act, 1961. Considering factual matrix and legal intricacies, we find no merit and substance in the contentions of the appellants counsel and accordingly, the orders of the CIT(A) are sustained in upholding the addition on account of Sales Commission.

Summary

Issues:
Challenge to addition on account of Sales Commission in Assessment Years 2013-14 and 2014-15.

Analysis:
The appeals were filed against the order passed by the Ld. Commissioner of Income Tax (Appeals), Jammu, regarding the addition on account of Sales Commission in the respective assessment years. The appellant contested the order upholding the addition of Rs. 3,54,311/- and 3,39,083/- by the Assessing Officer. The primary contention was that the Sales Commission paid to various employees was part of their salary package and aimed at incentivizing them, contributing to the company's progress.

In the grounds of appeal, the appellant argued that all employees, including Estate Officer, Store Keeper, Cashier, G.D. Clerk, Labour, Computer Operator, Accountant, and Peon, were remunerated based on the sales of the company. The appellant emphasized that the employees' pay package was linked to the sales, and the Sales Commission was integral to their monthly remuneration. The appellant cited a case to support the argument that the Revenue cannot dictate how much expenditure is reasonable for a business.

The appellant highlighted that the employees mentioned were directly or indirectly related to the sales operations of the company. However, the authorities disallowed the Sales Commission claiming that the employees were not directly related to the Sales Department. The appellant also raised concerns about not being granted a personal hearing by the CIT (Appeals) and emphasized the importance of considering the judgment of the Hon'ble Tribunal.

During the hearing, it was noted that the appellant failed to provide detailed information regarding the nature of the payments claimed as Sales Commission and whether TDS was deducted on such payments. The Tribunal observed that the mere claim that all employees were related to sales was insufficient to challenge the findings of the authorities. The Tribunal upheld the CIT (Appeals) decision on the grounds that the Sales Commission payments were not adequately supported with evidence of TDS deduction or promotion of sales.

The Tribunal differentiated the present case from previous judgments, stating that the issue at hand was the claim of Sales Commission without TDS deduction, not the genuineness of payments. Considering the factual and legal aspects, the Tribunal found no merit in the appellant's contentions and dismissed both appeals, upholding the addition on account of Sales Commission for the respective assessment years.

In conclusion, the Tribunal upheld the decision of the CIT (Appeals) regarding the addition of Sales Commission, emphasizing the importance of providing evidence for expenses claimed and complying with TDS regulations.