2013 (6) TMI 313 - HC - Income Tax

Commission expenses - genuineness of transactions and reasonableness of payments - held that - the entire issue is based on appreciation of relevant evidence on record. In terms of such evidence concurrently, the CIT(A) as well as the Tribunal held that payment of commission was not only genuine but also in terms of the agreement between the parties. - deduction allowed - decided in favor of assessee. Addition on account of writing back of loan liability - remission of liability - held that - Tribunal finds support from the decision of this Court in case of Chetan Chemicals (P.) Ltd. (2001 (10) TMI 12 - GUJARAT High Court ) - revenue, however, placed reliance on the decision of Delhi High Court in case of Rollatainers Ltd. v. CIT 2011 (8) TMI 447 - DELHI HIGH COURT where, the distinction is drawn for cessation of liability on the basis whether the loan was a trading liability or a capital liability. - when the Assessing Officer did not pursue this line and brought no evidence on record to make a discussion as is sought to be legally canvassed before us, at this stage, we cannot find fault with the view of the Tribunal. - decided against the revenue. Interest income of FDRs - taxability - held that - Since this income was already offered by the assessee, no further addition is required to be made. - Decided against the revenue.

Summary

Issues:
1. Disallowance of commission expenses
2. Deletion of addition on account of writing back of loan liability
3. Deletion of addition on account of interest income on FDR

Issue 1: Disallowance of Commission Expenses
The issue revolved around the disallowance of commission expenses of Rs. 5.40 crores by the Assessing Officer due to concerns regarding the genuineness of payments. The CIT(A) reversed the disallowance, emphasizing that the commission payments were approved by the Board of Directors and supported by an agreement with the recipient company. The Tribunal upheld the CIT(A)'s decision, noting that the commission income was reflected in the recipient company's tax returns and was paid for services rendered in procuring orders. The High Court concurred, stating that the evidence supported the genuineness of the payments, and no legal question arose.

Issue 2: Deletion of Addition on Account of Writing Back of Loan Liability
Regarding the deletion of the addition of Rs. 1.28 crores on account of writing back of loan liability, the Assessing Officer treated it as a remission of liability for taxation. However, both the CIT(A) and the Tribunal relied on a previous court decision and held that no addition could be made under Section 41(1) of the Income Tax Act for remission of loan liability when no deduction was allowed earlier. The Tribunal's decision was supported by the High Court, which declined to entertain further legal contentions raised by the revenue, as no fault was found with the Tribunal's view.

Issue 3: Deletion of Addition on Account of Interest Income on FDR
The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 66.77 lakhs on account of interest income on fixed deposits. The CIT(A found that the interest income was already offered by the assessee and shown as accrued interest in the balance sheet. The Tribunal concurred, stating that since the income was already offered, no further addition was required. As the issue was factual, the High Court rejected the revenue's grounds, concluding that no legal question arose.

In conclusion, the High Court dismissed the tax appeal, affirming the decisions of the lower authorities on all three issues after thorough analysis and consideration of the facts and legal aspects involved in each matter.