9911796707
TMI Blog1980 (4) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee is used in tanning of leather in Tamil Nadu, Andhra Pradesh and elsewhere. During the two years the assessee paid sales commission to M/s E.K. Hajee Mohamed Meera Sahib Sons, Erode, M/s Goli Venkateswara Rao Co., Vijayawada, M/s Wattle Agencies, Madras-1 and Ashok Wattle Agencies, Madras. The ITO found that the last two concerns were concerns in which the Directors/share-holders and their families were interested. She therefore made some enquiries regarding the genuineness of the payment. The assessee furnished some certificates from the customers to suggest that services were rendered by these agencies in procuring orders. Some of these customers, one Shri S. Ramaratnam employed by these two agencies and the managing par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement with him. The gist of the orders of the ITO is that there was no necessity for agents when there was a ready market for the assessee's products which were scarce, because they were otherwise only to be imported. The agreement was made six months after the agency was actually constituted. It has not been shown that there had been increase in sales as a result of the activities of these two agents. There has been no substantial expenditure incurred by the agents to justify their remuneration. The agents had no separate office, godown, order books or separate deposits with the company as would have been in the case of genuine concerns. Company Law authorities were also not satisfied with the agreements and there had been contravention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e itself made representation about the quality of the assessee's products so as to get free import licence for foreign wattle extracts. As for lack of increase in sale, it was explained that there had been increase except for the period when there had been lesser production due to some deadlocks in the factories. Shri S.S.M. Balakrishnan of M/s Wattle Agencies and Shri S.M. Sundaram of M/s Ashok Wattle Agencies were examined by the ITO and nothing incriminating was elicited from them. The fact that Shri Ramaratnam was a common employee or that he took orders from the sales Department of the assessee-company or that he had received some payments from the assessee-company on account of the agencies, it was found, did not vitiate the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of s. 314, it is not necessary to go into the legal question whether the amount would be admissible even if there had been violations. Such a discussion of law on the hypothetical question is not necessary. We have, therefore, to consider the question mainly from the angle as to whether there had been genuine firm. It must be remembered that the mere fact that the directors/shareholders were interested in the agencies would not make either the firms or the payments non-genuine. We have gone through both the agreements. They provide for 6 per cent commission on sales. The period of the agreement is three years, but liable to be cancelled on a month's notice. There was a specific undertaking to procure orders of 63 tonnes during each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine, we can only say that the materials for establishing the same have not been brought on record. When the apparent is claimed to be unreal, it is for the ITO to establish what is real with reference to positive facts. No amount of suspicion and surmises can be equivalent to evidence. The fact that some commission has been paid to persons interested in the company may call for verification and further enquiries, but cannot become grounds by themselves for disallowance. Both the agencies have since been discontinued and Ramarathnam has joined regular employment of the company. This was sought to be pointed out by the Deptl. Rep. as a confirmation of the inference of the ITO. We are unable to agree with him. It is pointed out by the ld. repr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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