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TMI Blog2013 (10) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge of the burden has to be effective and meaningful and not to cover up by merely book entries and paper work – there was no infirmity in the order of lower authorities in making this disallowance which is upheld – Decided against Assessee. - ITA No. 3070/Del/2011 - - - Dated:- 11-10-2013 - Shri R. P. Tolani And Shri Shamim Yahya,JJ. For the Appellant : Shri K. R. Manjani Adv. Shri Prakash Gupta CA For the Respondent : Shri K. K. Jaiswal DR ORDER Per R. P. Tolani, J.M :- This is assessee's appeal against CIT(A)'s order dated 23-5-2011 relating to A.Y. 2008-09.Following grounds are raised: "1. That the order passed by the Ld. A.O. and confirmed by the CIT(A), New Delhi is not only bad in law but also against the facts of the case. 2. That Ld. CIT(A) is erred under the law and facts while confirming the addition made by the A.O. on account of sales commission in view of the fact that the appellant had duly filed various details documents confirming the services rendered by the sales agent to the appellant. 3. That the Ld. CIT(A) is erred under the law while confirming the adhoc disallowance out of foreign traveling expenses amounting to Rs. 1,50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d allied products. (ii) KSSD has been claiming carry forward of unabsorbed depreciation and huge business losses since past years and the commission income has been utilized to reduce the loss and allow the assessee to reduce its profits. (iii) The auditors M/s Prakash Prakash CAs were common to both of them. (iv) Nothing has been produced by KSSD to show that any of the directors had any experience in the line of modular kitchen and appliances. (v) The commission has been shown by KSSD as business income whereas it as never its business activity. (vi) KSSD was a loss making concern, paying no taxes. 2.5. Assessing officer further drew adverse inference that the commission @22% given to KSSD was exorbitant, contrary to market practice and not expended for business purposes as assessee had failed to discharge its burden in this behalf, this commission was disallowed. 2.6. Apropos foreign traveling expense, the same was disallowed by following observations: "The assessee has claimed foreign traveling expenses of Rs. 15,73,323/- which includes expenses on air ticket and lodging and boarding. From the details filed it is seen that the expenses include purchase of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact tht the expenditure was wholly and exclusively in connection with business purposes. Accordingly, the disallowance made by the ld. AO is being sustained." Aggrieved, assessee is before us. 3. Ld. Counsel for the assessee contends that addition has been sustained on wrong premise. It is an established market practice that for sale of modular kitchens one has to hire services of various agents and it is not the case of the department that the commission has been paid only to KSSD. A list is enclosed showing payment of Rs. 29,50,904/- to persons other than KSSD which has been allowed by the assessing officer. 3.1. Besides the commission has been paid to KSSD in A.Y. 2009-10 and 2010-11 also. However in subsequent year in A.Y. 2009-10 the commission has been allowed by an order u/s 143(1) and for A.Y. commission has been allowed vide order u/s 143(3). The commission was paid by a written agreement (MOU) dated 2-4-2007. It is pleaded that the expertise of selling agent is not a criteria, the important issue was KSSD's contracts. 3.2. Ld. Counsel drew our attention to clause 11 of the MOU which is as under: "11. That the Agent shall be entitled for sales commission @ 22% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to time. 13. That it has been understood by the Agent any deduction out of invoices raised by the Principal to the customer of the Agent, shall be on Agent's accounts without any dispute." 4.1. Except confirming the amount and giving details, assessee and KSSD both have not produced any other document, letter head, invoice etc. as pr the MOU. It is undisputed fact that KSSD has huge claim of unabsorbed depreciation and business losses, whereas the assessee is a profitable firm. There is previous experience of KSSD in selling of modular kitchens as it has not claimed any technical experience in this field except of selling milk, ghee, paneer, butter etc. sale of modular kitchen is a sophisticated activity and as per MOU the Agent was supposed to have an office, the printed letter head and invoices describing himself as selling agent of the Principal, the assessee was supposed to forward copy of invoices to the agent office maintain relevant record. The commission will be given only after the full particulars about inquiries, delivery, sale of a modular kitchen and its proceeds are realized by the Principal. All these conditions of MOU clearly show that the assessee and Agent wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire material available on record. Facts have been narrated in details above. Section 37(1) prescribes as under: "37(1) - Any expenditure not being expenditure of the nature described in section 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "profits and gains of business or profession". 5.1. As the facts emerge, assessing officer asked specific query to demonstrate that the expenditure was laid out or expended wholly and exclusively for the purpose of business, meaning thereby the amount was paid for the services which are rendered for the assessee's business. Assessee supplied only confirmation about the payment of commission and the income-tax record of KSSD. However, on the issue of rendering of service, no document record or evidence what-so-ever was furnished despite so many requisitions by assessing officer. The MOU is relied on by the assessee to substantiate its claim that the amount was spent as per the binding MOU for the purpose of business. At the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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