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2022 (7) TMI 120 - AT - Income TaxDisallowance of commission expenses - HELD THAT - We find that the assessee made TDS on payments of commission, similarly it was also subject to service charges payments. Both the parties are taxed at the maximum rates. The assessing officer has not brought any adverse evidence on record to discard the evidences filed by the assessee to substantiate the genuineness of the commission payment. We find that Hon ble Gujarat High Court in CIT Vs Sujlon Energy Ltd ( 2013 (7) TMI 697 - GUJARAT HIGH COURT held that where there was sufficient evidence regarding authenticity of payment of sales commission to agents, same cannot be disallowed. In CIT Vs Shree Rama Multi Tech Ltd ( 2013 (10) TMI 306 - GUJARAT HIGH COURT held that increase in commission expenses as compared to earlier year was no ground to disallow the expenses. In Nangalia Fabrics (P) Ltd ( 2013 (8) TMI 80 - GUJARAT HIGH COURT it was held by High Court that commission paid through account payee cheque s on account of sales canvasses by party was not bogus payment. In Voltamp Transformers (P) Ltd 1980 (10) TMI 35 - GUJARAT HIGH COURT as held that when assessee-company, dealers in transformers, appointed firm consisting wives of its main shareholder as partners, as its sole selling agent at agreed commission ranging from 3% to 5%, the Tribunal was not justified and wrongly concluded that commission was exorbitant and was not justified by the test of commercial expediency. As held that the commercial expediency and the business need of organisation are concerned, it is not the view point of the assessing officer which should count but it should be the viewpoint of the ordinary bussiessman dealing with a situation faced by the assessee. The Coordinate bench of Mumbai Tribunal in Quantum Advisors (P) ltd 2016 (10) TMI 1 - ITAT MUMBAI also took view that where the group concern had adequate infrastructure and ability to render marketing and distribution in term of agreement with the assessee as a result of which assessee got business, payment could not be rejected on mere hypothetical basis. - Decided against revenue. Deemed dividend u/s 2(22)(e) - HELD THAT - CIT(A) after considering the submissions of assessee accepted the contention/ explanation of the assessee held that on going through the ledger account of both the concerns i.e. Pawan Syntex Pvt. Ltd. and Rashmi Polyfab Pvt. Ltd., it is apparent that at the beginning of F.Y. 2010- 11 i.e. on 01/04/2010, the assessee had amount receivable from both the companies, therefore, lump sum amounts shown in separate accounts cannot be treated as unsecured loans. The net effect of merging of both the accounts of the two companies ultimately indicates balance receivable at the end of the financial year as well. The ld CIT(A) accepted the submissions of the assessee that the amount of Rs. 82.25 lacs and Rs. 29.00 lacs received from these two companies were pertaining to business transactions. Before us, the ld CIT-DR has not controverted these findings of the ld CIT(A), except making submissions that the ld CIT(A) accepted the version of assessee. Neither any contrary fact nor any law is brought to our notice to discard the finding of ld CIT(A) that transaction of amount of Rs. 82.25 lacs and Rs. 29.00 lacs received from these two group companies were not pertaining to business transactions. Hence, we do not find any merit in this ground of appeal raised by the assessee. Delay in depositing the employees contribution towards PF and ESI - HELD THAT - We find that as on today the issue is covered against the assessee by the decision of Hon ble High Court in CIT Vs GSRTC ( 2014 (1) TMI 502 - GUJARAT HIGH COURT - Therefore, the assessee has no merit in its case - INstead of keeping the matter alive, the case was restore to Ld.CIT(A) to give effect to the order of the Tribunal in accordance with the decision of Hon'ble Supreme Court in SLP of Gujarat State Road Transport Corporation(supra), In the result, appeal of the assessee is allowed for statistical purpose.
Issues Involved:
1. Disallowance of commission expenses. 2. Addition of unsecured loans as deemed dividend under Section 2(22)(e) of the Income Tax Act. 3. Disallowance of employee's contribution to ESI and Provident Fund under Section 36(1)(va) of the Income Tax Act. Detailed Analysis: 1. Disallowance of Commission Expenses: The revenue challenged the deletion of the addition of Rs. 6.39 crores made on account of disallowance of commission expenses. The Assessing Officer (AO) disallowed the commission expenses paid to Paras Petrofils Ltd. and Sonic Biochem Extractions Ltd. on the grounds that the services rendered by these companies were not substantiated. The AO's disallowance was based on various factors, including the lack of mention of the commission agents in the sale and purchase bills, and the failure of Paras Petrofils Ltd. to provide evidence of services rendered. The AO also questioned the business domain of Sonic Biochem Extractions Ltd. and doubted the necessity of such high commission rates. The assessee argued that the commission payments were made based on written agreements, and the services rendered by the agents significantly increased the company's turnover and profitability. The assessee provided details of the agreements, services rendered, and payment records, including TDS and service tax payments. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the AO's conclusions were based on mere presumption and guesswork. The CIT(A) noted that both commission agents had significant business turnover and expertise in their respective fields, and the sales of the assessee had increased drastically due to their services. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, noting that the AO had not provided sufficient evidence to discredit the assessee's claims. 2. Addition of Unsecured Loans as Deemed Dividend under Section 2(22)(e): The AO treated the unsecured loans received from Pawan Syntex Pvt. Ltd. and Rashmi Polyfab Pvt. Ltd. as deemed dividends under Section 2(22)(e) of the Income Tax Act, as these companies had more than 10% shareholding in the assessee company. The assessee contended that the amounts were erroneously shown as unsecured loans due to an accounting mistake and were actually payments for sales and job work. The CIT(A) accepted the assessee's explanation, noting that the amounts were related to business transactions and not loans. The Tribunal upheld the CIT(A)'s decision, finding that the AO had not provided any contrary evidence to dispute the assessee's claims. 3. Disallowance of Employee's Contribution to ESI and Provident Fund under Section 36(1)(va): The AO disallowed the delayed payment of employee's contribution to ESI and Provident Fund, citing the Gujarat High Court's decision in CIT vs. Gujarat State Road Transport Corporation, which held that such contributions are only deductible if paid within the due dates prescribed under the relevant Acts. The assessee admitted that the payments were made after the due dates but argued that they were deposited before the end of the financial year. The CIT(A) upheld the AO's disallowance, and the Tribunal noted that the issue was covered against the assessee by the jurisdictional High Court's decision. However, the Tribunal also acknowledged that an appeal against this decision was pending before the Supreme Court and directed that the matter be decided in accordance with the Supreme Court's eventual ruling. Conclusion: The Tribunal dismissed the revenue's appeal regarding the disallowance of commission expenses and the addition of unsecured loans as deemed dividends, upholding the CIT(A)'s decisions in favor of the assessee. The Tribunal allowed the assessee's appeal regarding the disallowance of employee's contribution to ESI and Provident Fund for statistical purposes, directing that the matter be decided based on the outcome of the pending Supreme Court appeal.
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