9911796707
TMI Blog2011 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. During the year, the Assessee claimed commission expenses of Rs. 1,10,20,201, allegedly paid to foreign agents. The rate of commission worked out to 12.50%. From the invoices and the Bank Realization Certificates (BRCs), the AO found that the commission had been reduced from the invoice values and that, no remittance, had been made from India. It was therefore an expenditure of the foreign buyer. It was for this reason that the Assessee was unable to provide any relevant details, including the names and addresses of the so-called foreign agents or even the services rendered. The AO therefore issued a show-cause notice asking the Assessee to explain why the commission expenses should not be disallowed. The Assessee submitted that the export/sale proceeds had been shown as net of commission which had been deducted by the buyer at Dubai. It was thus not in the hands of the Assessee to decide whether or not commission was to be paid. It was submitted that this was the general trade practice, and therefore, no disallowance should be made. 4.1 The AO rejected the Assessee's submissions. He observed that it was only on inquiries regarding the receipts that the deduction of commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission expenditure from the Profit and Loss account. Commission payments should have been accounted for in the same way and manner trade discount is accounted for, which is also netted out from purchases/sales and yet, a separate corresponding entry is made under head of trade discount'. Moreover, an entry in the P&L account can be (sic) off only with another entry in the P&.L account but never against an en the trading account. The entries passed by the Assessee were thus blatantly incorrect and hence misleading, which could make the books of account to rejection u/s.145 of the IT Act. Under the provisions of sec. 44AB Assessee was required to show either the 'total sales' or the 'gross receipt'. By showing the sales at net value, the Assessee had violated the provision the said section. 4.3 Rebutting the Assessee's argument that he could not be taxed on what he had not received, the AO observed that the Assessee was to be taxed on his total income, which is defined under Sec.5 of the IT Act. The Assessee was to be taxed on his total income on accrual basis, even if he receive such income. Therefore, it was not relevant for the purpose of taxation as to whether or not the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering of services. 'Since, the Assessee had claimed to have paid the commission by deducting it from the invoice value itself, the onus was on the Assessee to establish that services were actually rendered by the so-called agents, and that, the Assessee's business had derived benefit from such services. Only in such a situation could the commission expenditure be treated as wholly and exclusively incurred for the purpose of business. On the other hand, the person receiving the commission ought to have proved and established that the services rendered by him had served to increase the business prospects of the Assessee. This, both the Assessee and the agents had failed to establish. The simple payment of commission did not succeed in establishing its relevance for the Assessee's business. In support of such a view of the matter, the AO placed reliance on several case laws. Finally, the AO came to the conclusion that the Assessee had failed to prove the exact nature of the services provided by the so-called commission agents and thereby had failed to establish that the expenditure incurred had been wholly and exclusively for the purpose of business. The Assessee had also failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone through the orders of authorities below. We find hat this issue is squarely covered in favour of the assessee by various tribunal decisions cited by the Ld. A.R. The facts are identical in the present case and in these cases cited by Ld. A.R. The relevant para 9-12 in the Tribunal order rendered in these of Sanjay Jain are reproduced below: "9. In fact, in the situation of the case, as stated in the above paragraph, it is to be seen that the export sale proceeds received by the assessee was net amount alone and not the gross amount. It is also to be seen that the foreign buyer is not bound to pay to the assessee the amount covered by the commission or discount at any future date. Therefore, the right/claim of the assessee in respect of the export sales was to receive only the net invoice amount and nothing more. Therefore, there is nothing left over by way of balance to be treated as income accruing or arising to the assessee outside India by virtue of the impugned export sales. The entire income attributable to the export sales were already received by the assessee in India in the form of convertible foreign exchange. This position is proved by the certificates issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buyer. Hence, there is no difference in facts and therefore, by respectfully following the various tribunal orders cited by the Ld. A.R., we hold that the addition made by the A.O. is not justified and the same is deleted. Ground no.1 of the assessee is allowed. 5. Regarding ground No.2, we find that it is noted by the A.O. in para 3 of the assessment order that the assessee has debited expenses of Rs. 12,88,513/- under various heads. He further noted that on being asked to submit relevant books of account and other supporting evidence, assessee took the plea that all the books of account with papers etc. were drowned in disastrous flood that came in the city of Surat. The A.O. issued show cause notice asking the assessee to show cause as to why for want of details and supporting evidences, 20% of expenses should not be disallowed. The A.O. further noted that in response to this, assessee has not submitted any satisfactory reply. The A.O. then made disallowance of 20% of the total expenses and made addition of Rs. 2,57,703/-. Being aggrieved, the assessee carried the matter in appeal before CIT(A) but without success and now, the assessee is in further appeal before us. 6. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
