2014 (6) TMI 507

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..... the learned CIT(A) erred in confirming the disallowance referable to commission paid on exports made to Iraq under "Food for Oil Programme", based on the findings in the Volcker Committee Report. 3. Facts necessary for disposal of the appeals are stated in brief. The assessee firm is engaged in the business of export of machines used in pharmaceutical industry. Though, in the short note filed before us, it is stated that the assessee is engaged in the business for over 25 years, in the statement of facts filed before the CIT(A) it was stated that the assessee is in the business for the last more than 10 years as General Merchant and Exporter and the entire sales were by way of exports. It is not in dispute that the exports were made to Ira .....

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..... s, and bank accounts of the concerns to whom the payments were made. 5. For the years under consideration assessments were reopened by issuing notice under section 148 of the Act and during the course of assessment proceedings the assessee was asked to show cause as to why the surcharges paid directly or indirectly to Iraq should not be disallowed, in the light of the report of the "Independent Inquiry Committee into the United Nations Oil-for food programme" prepared under the Chairmanship of Paul A. Volcker. In response thereto the assessee submitted that it has not paid any "after sales service fees" to the Iraq Government. 6. The AO did not accept the contention of the assessee mainly based upon Volcker Committee report wherein it was .....

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..... A.Y. 2001-02 the payments were made to parties at Jordan and Syria and not to parties at Iraq or to Iraq Government. It was also contended that there is no provision for payment of "after sales service fees" in the contract and commission was not paid before the goods were permitted to enter Iraq. In the absence of doubting or disputing commission payment, and also the fact that the assessee has not imported oil, the mechanical application of the communication received from the CBDT for the purpose of invoking Explanation to section 37(1) is not in accordance with law. 8. On the other hand, the learned D.R. strongly relied upon the orders passed by the tax authorities. He, however, fairly admitted that the issue stands covered by the afore .....

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