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TMI Blog2013 (12) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... e in earlier years – The same were allowed by the Revenue – Decided in favour of the assessee. Disallowance of recovery commission paid by the assessee – The assessee entered into an agreement with the associate concern, M/s. Media Expert Pvt. Ltd (MEPL) and the recovery commission of Rs. 157.82 lacs @ 9% of amount collected on account of advertisement charges - Held that:- Following J K Woollen Manufacturers vs. CIT [1968 (8) TMI 15 - SUPREME Court] - The commission stood paid to MEPL since 1.1.1996 and commission income received by MEPL stood returned and assessed by the Department in the hands of MEPL - MEPL had actually rendered services relating to recovery, marketing, billing, collection of advertisement - The transaction with the associate concern was not merely a paper transaction – While applying the test of commercial expediency, for determining whether an expenditure was wholly and exclusively laid out for the purpose of assessee's business, reasonableness of the expenditure has to be judged from the point of view of a businessman and not of IT Department - Decided against Revenue. - I.T.A. NO.151/M/2011, I.T.A. NO.142/M/2011 - - - Dated:- 6-2-2013 - Shri B. R. Mit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Media World enterprises for such advertisement. Out of 16,85,640 pieces of calendars, only 5,68,295 pieces of calendars are purchased by the assessee. The balance calendars are sold to outsiders with the logo and name of the assessee. Media World Enterprises, is a publisher and it is not a mere printer as a Hindu calendar, as rightly pointed out by the learned Counsel requires many inputs, material and specialized knowledge which can be done only by certain persons having the expertise. The calendar gives much information for use of Hindu public. It is not the case of the Revenue that all these information and material of the calendar were furnished by the assessee. Paying Rs. 2 in excess per calendar, for getting advertisement in about more than 10,00,000 pieces is justifiable. In any event, when both, Media World Enterprises and the assessee company are paying tax at the very same marginal rate, the question of the assessee's diverting the profits does not arise. There is no loss to Revenue. Hence, for all these reasons, ground no.1 raised by the assessee for the assessment year 2005- 2006 is allowed." 3. Considering the above settled nature of the issue and on finding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not a case of tax planning. Under these circumstances, we allow the ground raised by the assessee." 6. Considering the commonness of the issue, we find no reason to deviate from the order of the Tribunal for the assessment year 2006-2007. Accordingly, grounds ground no.2 raised by the assessee is allowed. 7. In the result, appeal of the assessee is allowed. I.T.A. NO.142/M/2011 (Revenue's appeal) 8. Grounds raised in this appeal read as under:- "1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in deleting the disallowance of Rs. 2,37,70,518/- made on account of the disallowance of recovery commission claimed by the assessee as paid to M/s. Media Experts Private Limited (associate concern) though during the assessment proceedings assessee did not produce any evidence that the said party had actually rendered any services for recovery. 2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in deleting the addition of Rs. 2,37,70,518/- made on account of disallowance of recovery commission, without appreciating the fact that the assessee has failed to discharge its onus of proving the genuineness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring all the relevant facts, it cannot be disputed that MEPL had actually rendered services relating to recovery, marketing, billing, collection of advertisement. There was no cogent basis for the AO's remark that MEPL had not rendered services to the appellant company. (The reasons as given by the AO for the disallowance that the nature of the work was not clearly spelt out or infrastructure was provided by the appellant or MEPL was lacking independence or was not experienced in the line were of trivial nature and on the basis of such insignificant reasons, even if they had some substance, it cannot be held that the claim of payment of commission to the associated concern was not genuine and hence disallowable. The fact that Associate concern namely, MEPL was created with a view to deal exclusively with the recovery work of the appellant company preparing to advertisement could not be a valid ground for disallowance so long as the appellant company was able to prove that services were actually rendered by MEPL and payments made were not unreasonable. The AR's reliance on the judgment of ITAT Ahmedabad in the case of Poonjabhai Vanmali Sons 33 TTJ (Ahd) 91 lend support to the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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