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TMI Blog2011 (12) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... The related party through whom the sales effected was 869 lacs has been paid commission @ 3.75% commission. From the analysis made by the A.O. in the body of the assessment order, we find the commission paid to unrelated parties ranges from 1.5% to 3% whereas commission in the case of related party is 3.75%. Even assuming that the related party has rendered some extra services such as giving market information feed back regarding changing trends as well as commercial information etc. and giving services on all India basis still such huge increase in the rate of commission appears to be in higher side. Considering the totality of the facts of the case and considering the fact that the commission to un-related parties varies from 1.5 to 3%, therefore, payment of commission @ 3% to the related party as against 2.5% allowed by the A.O., in our opinion, is reasonable and will meet the ends of justice. We hold and direct accordingly. The ground raised by the assessee is accordingly party allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the ld. CIT(A) the assessee is in appeal before us. 4. The ld. counsel for the assessee submitted that Sales Tax incentive has got direct nexus with the sale and therefore has a nexus with the profit of the industrial undertaking. For example, he submitted that the assessee collects ₹ 100/- for Sales Tax, pays ₹ 25/- to the Government and retains ₹ 75/- as incentive allowed by the State Govt. Therefore, it has got a direct nexus. Referring to the decision of Hon'ble Bombay High Court in the case of CIT v. Vidyut Corporation reported in [2010] 324 ITR 221 (Bom) he submitted that interest on borrowed payment from debtors was held to be part of sale price and derived from the industrial undertaking. He submitted that following the same ratio, the Sales tax incentive so collected by the assesse has to be considered as part of sale price. Referring to the decision of Hon'ble Gauhati High Court in the case of CIT v. Meghalaya Steels Ltd. reported in [2011] 332 ITR 91 (Gauhati) he submitted that the Court held that the payment of Central Excise duty had a direct nexus with the manufacturing activity and similarly the refund of the excise duty also has a direct n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Ground No. 3 by the assessee reads as under:- "On the facts and in the circumstances of the case and in law, the Commissioner of Income-Tax (Appeals) erred in upholding the disallowance of a sum of ₹ 11,57,549/- in respect of commission paid to Shatul Commercial Co. Pvt. Ltd. a group concern of the appellant." 7.1 Facts of the case in brief are that the assessee is engaged in the business of manufacturing of all types of stone cutting tools in its factory at Goa. During the course of assessment proceedings, the A.O. noted that the assessee has paid an amount of ₹ 66,07,486/- as commission on sale which includes commission of ₹ 34,72,646/- to Shatul Commercial Co. Pvt. Ltd., which is a group concern of the assessee. The above commission works out to 3.75% on consignment sale of ₹ 8,69,62,266/-. The A.O. noted that the assessee has paid commission @ 1.5% to 3% to other parties whereas the same is 3.75% to the related party. He, therefore, asked the assessee to justify the payment of higher commission paid to related party and explain as to why the excess commission paid to the related party should not be disallowed. 7.2 It was explained by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have been rendered by it are considered. He observed that the A.O. was reasonable to allow the commission in respect of M/s Shatul Commercial Co. Pvt. Ltd. @ 2.5% as against 1.5% of commission paid to Shanti Udyog. He accordingly upheld the order of the A.O. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before us. 8. The ld. counsel for the assessee submitted that M/s Shatul Commercial Co. Pvt. Ltd. was earlier paid commission @ 2.5% and this year the same has gone up to 3.75%. Referring to paper book page 7-8 he drew the attention of the Bench to the copy of agreement between the assessee and M/s Abhinav Marble Mining Pvt. Ltd. and submitted that the area of operation of the commission agent is restricted to the districts of Rajsamand and Chittorgarh in the state of Rajasthan. Referring to the copy of agreement between the assessee and M/s Ram & Sons (a copy of which is placed at paper book page 10 & 11), he submitted that the area of operation of the said party is restricted to Borawar. Referring to the copy of agreement between the assessee and M/s Shanti Udyog (a copy of which is placed at paper book page 13 to 15), he submitted that the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the A.O. on the ground that another commission agent M/s Shanti Udyog which is an un-related party was given commission @ 1.5% on a turnover of ₹ 852 lacs whereas the rate of commission paid by assessee company to the related party M/s Shatul Commercial Co. Pvt. Ltd. @ 3.75% on a turnover of ₹ 869 lacs. Since the turnover effected by the related party as well as the un-related party are almost same, therefore, there is no justification in giving higher rate of commission to the related party. It is the submission of the ld. counsel for the assessee that the area of operation in the case of M/s Shatul Commercial Co. Pvt. Ltd. was on all India basis whereas in the case of un-related parties, it is restricted to part of area of Rajasthan. Therefore comparison cannot be made with all India operation and restricted area of operation. We do not find much force in the above submission of the ld. counsel for the assessee. The ld. CIT(A) has already given a finding that the quantum of sales effected through M/s Shanti Udyog was ₹ 852 lacs and they were paid commission @ 1.5%. The related party through whom the sales effected was ₹ 869 lacs has been paid commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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