2011 (1) TMI 1340 - AT - Income Tax

Summary

Issues involved: The issue involved in this case is the deletion of disallowance of excessive payment of remuneration to dealers by the assessee, for assessment year 2006-07.

Issue 1 - Disallowance of Excessive Payment of Remuneration:
The Assessing Officer (AO) disallowed a balance payment of &8377; 89,98,913/- made by the assessee to its dealers, treating it as unreasonable and excessive, while restricting the claim of deduction of remuneration paid to dealers at 6% of total commission receipts. The Commissioner of Income Tax (Appeals) directed the AO to delete the addition, following the first appellate order for assessment year 2005-06.

Issue 2 - Error in Tribunal Order:
The Tribunal observed an error in its previous order where it stated that a decline in payment of remuneration was warranted due to the setting up of outlets, which was factually incorrect. The Tribunal acknowledged that the facts for the year under consideration were similar to those in assessment year 2005-06, and the observation regarding decline in payment was a mistake apparent from the record.

Issue 3 - Correction of Tribunal Order:
Upon realizing the errors in the previous order, the Tribunal recalled its order dated 30.11.2009. It substituted the relevant paragraphs to confirm the action of the Commissioner of Income Tax (Appeals) in deleting the disallowance of excessive payment of remuneration to dealers, based on a similar Tribunal order for assessment year 2005-06. The Department's appeal was rejected, and the appeal of the Department was dismissed.

In summary, the Tribunal corrected its previous order regarding the disallowance of excessive payment of remuneration to dealers by the assessee for assessment year 2006-07. The Tribunal acknowledged errors in its initial observations and confirmed the deletion of the disallowance based on the similarity of facts with assessment year 2005-06, ultimately dismissing the Department's appeal.