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TMI Blog2015 (4) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this ground back to the stage of the Assessing Officer with the direction that the assessee shall place on record the basic requirement of business necessity for taking on hire the impugned DG set. With these remarks this ground is restored back to the file of Assessing Officer for De novo decision. Therefore, for this year also, this issue is also restored to the file of AO for decision afresh. The AO is hereby directed to decide this issue in the light of the direction by the Coordinate Bench in ITA No.261/Ahd/2010 [2012 (11) TMI 160 - ITAT, AHMEDABAD]. Thus, ground Nos.2 & 2.2 of Revenue’s appeal are allowed for statistical purposes. - Decided partly in favour of revenue. - I.T.A. No.313/Ahd/2011 - - - Dated:- 10-4-2015 - Shri N.S. Saini And Shri Kul Bharat JJ For the Appellant by : Shri M.K. Singh, Sr.DR For the Respondent : Ms.Urvashi Shodhan ORDER PER BENCH : This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VIII, Ahmedabad ( CIT(A) in short) dated 01/11/2010 pertaining to Assessment Year (AY) 2007-08. The Revenue has raised the following grounds of appeal:- 1. The Ld.CIT(A)-VIII, Ahmedaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical issue came up for hearing before this Tribunal. However, ld.counsel for the assessee submitted that this Tribunal had made observation in para-6 of the order in ITA No.261/Ahd/2010 pertaining to AY 2006-07. Ld.counsel for the assessee submitted that all details are available on record that goes to demonstrate that the Assessing Officer was not justified in making the addition. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. In respect of ground Nos.1 1.2 are against the deletion of disallowance of ₹ 27,46,569/- made on account of commission payment to M/s.Nakoda Enterprises. We find that the ld.CIT(A) has decided this issue following his predecessor s order passed in AY 2006-07 by holding as under:- 2.3. I have carefully considered the findings of the A.O. and submissions of the appellant and other material available on record. Grace Casting Pvt.Ltd. is a company incorporated under the Companies Act with the main object to manufacture and trade in the area of metal products. During the relevant previous year the appellant was engaged in manufacturing ingots and bars and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciating the facts correctly has alleged that the appellant has paid ₹ 50 per M. T to other commission agents. In fact the appellant has paid commission @ ₹ 50 per M. T to the parties from whom it has made purchases during the relevant period. Therefore under these circumstances I do not find any reason to disallow the commission paid by the appellant to Ms Nakoda Enterprise. In this regard reliance is placed on the decision of Hon 'ble ITAT Delhi in the case of ACIT v/s Associated Strips (P) Ltd. 1 SOT 338 (Del) where in the Hon'ble Tribunal has held that Once it had been held that the commission was paid against services rendered by the respective commission agent then without assigning any reason, disallowance of commission was not justified - Rendering of services by commission agent not being in dispute payment of commission through account payee cheques against bills raised could not be disallowed even partly . My Predecessor Ld. CIT(A) has discussed the issue in detail and after giving logical findings on the impugned issue has deleted the addition in the previous assessment year. The A.O. has not brought any additional evidence on record to subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement but still it is open to the Revenue Department to decide the deductibility and the genuineness of the expenditure. (x) That the genuineness of the existence of the selling agency is required to be established and not to be based upon a makebelief document. The Hon'ble Courts have therefore held that mere existence of agreement do not bind the ITO to allow such deduction of payment of commission. (xi) That the assessee is definitely under obligation to establish the necessity for incurring of- expenditure, because an expenditure should not be a gratuitous payment to near-ones. (xii) That the allowability of expenditure depends upon the fact that it ought to be wholly and exclusively for the purpose of the business. (xiii) That the rendering of services by the agent and the exact work done for procuring the business is the primary evidence to be placed on record to establish that the expenditure was exclusively for the business. 6.1. These are the few points which are required to be examined by the Revenue Department while investigating the genuineness of the transaction. We want to clarify that the points referred hereinabove are not exhaustive but mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses are held to be incurred during the course of business partial disallowance is not permissible. In this regard reliance is placed on the decision of Hon'ble Calcutta High court in the case of Ravi Marketing Pvt. Ltd. v/s CIT 280 ITR 519 wherein the Hon'ble Court has held The authorities under the Income-tax Act can examine the genuineness of the expenditure and the purpose for which it was expended. Once it is established that the amount was genuinely expended and it was expended for a particular purpose, the only discretions that is left to the authority under the Act is to apply the law on the basis of such established fact or finding. If the purpose for which it is expended is eligible for deduction under a particular head, no discretion is left to the authority either to surmise the quantum that ought to have been spent or to surmise or presume the purpose differently and convert the same to some other head. 7.6 Therefore, in view of the above, the disallowance made by the above cannot be sustained. Hence, the disallowance of ₹ 18,00,000/- is hereby deleted . The Ld. A.R. put up all the facts on record to justify the payment of lease rent on D.G. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not have partly disallowed the claim by invoking the provisions of section 37(1) of IT Act. It is true that the AO has invoked the provisions of section 37(1) of IT Act while disallowing 50% of the claim. We have noted that the lease rent at ₹ 3 lacs p.m. was paid. The investment towards purchase of DG set was ₹ 96 lacs. Due to this reason, the Assessing Officer had worked out that the return on the said investment was more than 3%. According to. Assessing Officer, even the return on the said investment was higher because the assessee-lady should have claimed the depreciation on DG set. In such a situation, when a high lease-rent is being paid by the assessee-company to an interested party, then the fairness of the transaction should be properly placed on record by the assessee. The assessee-company was thus required to place on record the business need of the DG set. The onus is on the assessee to establish that the services of DG set were imminently required to run the business. Meaning thereby the assessee has to demonstrate the business necessity for hiring of the DG set. Therefore, it was expected that the assessee should place on record certain evidences, su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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