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TMI Blog2015 (12) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the total addition of Rs. 74,35,828/- made on account of commission on sales." 3. Briefly stated facts of the case are that the assessee is engaged in trading in electrical switchgear items since many years under the name and style of M/s. Deep Enterprises and M/s. Vijay Enterprises. The assessee produced complete books of account along with bills and vouchers. The AO during the course of assessment proceedings, noticed from the Trading & P & L Account of M/s. Vijay Enterprises and M/s. Deep Enterprises that these two proprietary concerns of the assessee has debited expenses on account of commission on sales amounting to Rs. 8,75,000/- and Rs. 65,60,828/- respectively. The assessee was required to file details of date-wise commission paid to the parties. The assessee furnished the reply along with names and addresses of the parties to whom he had paid commission during the year and also nature of services rendered and business made, which is reproduced in the order of AO at page 2. Subsequently, the AO issued summons u/s. 131 of the Act on the commission agents but in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded lack of expertise, lack of expertise, lack of resources to carry out work, non response to notice under section 131 etc. makes it a case for total disallowance. This is due to fact that it is not established that payments was wholly and exclusively for business. Further the payment made to individuals/HUF are in round sum like Rs. 5,00,000/- (4 cases), Rs. 7,00,000/-, Rs. 9,00,000/-. There must be some link between the sum and intented work/work generated. This is also not established in this case. That makes a case of total disallowance of commission paid to individuals/HUF, all relatives of assessee. 12. In the context of payment to individuals/HUF who are relatives the decision in C.I.T. vs. Indo Saudi Service (Travel) P Ltd. 2009 310 ITR 306 (Bom.), Modi Revlon P Ltd. vs. ACIT 2 ITR (Trib) 632 Del are relevant. It was held that where commission paid to sister concern and sister concern is paying tax at higher rate, there cannot be vasion of taxes and hence section 40A(2) cannot be invoked. Here the Assessing Officer has made disallowance under section 37 and not section 40A(2). Section 40A(2) is a specific section to handle payment to relatives. Hence the case decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t returned unserved with the postal remark "Move/Not known". But the assessee before AO filed evidences that all the payments were made through account payee cheques and also furnished complete names and addresses of the parties along with PAN. The assessee has also deducted TDS on commission payments to the above stated commission agents and TDS certificates were also issued. The assessee also furnished the copies of certificates issued by AO of the concerned AO's of these parties u/s. 197(1) of the Act in favour of commission agents for lower deduction of TDS. The assessee also claimed that all these companies are registered companies and complete information is available in public domain i.e. the site of Ministry of Corporate Affairs and the same is maintained by Govt. of India. It was argued by assessee before the AO and before the CIT(A) and even now before us that these companies have incorporated the commissions received from assessee as income in their returns of income for the relevant assessment year . The assessee also filed copies of audited accounts of these parties before the AO wherein commission is disclosed as income in their accounts. The assessee also produced bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocured orders for the assessee in respect to sales effected and this can be verified from the sale bills and also commission bills. The services rendered by them on account of commission is towards enquiry regarding the items, their implementation into orders, arrangement of supplies, collection of payments and also collection of statutory forms etc. The assessee has produced complete details before the AO in respect to the commission paid to the above two parties like obtaining of sale orders, commission bills, payment through account payee cheques and deduction of TDS from the commission. We further find that assessee has been claiming this commission payment all along and revenue has disallowed this commission in AY 2009-10, eventually, the same was directed to be deleted by CIT(A) in appeal no. 411/CIT(A)/Asl/W-32/PUR/2011-12 vide order dated 01.07.2013 wherein after considering the submissions of the assessee, he deleted the addition by observing as under: "5. The ground of appeal reproduced below explains assessee's stand: "Disallowance of Commission paid amounting to Rs. 13,56,630/-. Sir, during the course of scrutiny proceedings the Ld. Assessing Officer has asked for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st to deny the claim of deduction of commission. Ground no.1 is accordingly allowed." This order of CIT(A) is accepted by revenue and no further appeal is filed against this order. 8. In view of the above facts and circumstances, we are of the view that when the payments are made through account payee cheques and also furnished PAN of recipients commission, the same could have been verified by the AO from the assessment records of the respective recipients. Further, this commission is subject to TDS and assessee has either deducted TDS or furnished certificate issued u/s. 197(1) of the Act by the ITO, TDS in favour of the commission agents for lower deduction or nil deduction of TDS. The assessee has also filed complete particulars of commission recipients i.e. names and addresses along with confirmations. The complete sale bills and commission bills mentioning the nature of services rendered by these parties are filed and the services rendered includes enquiry for orders, translating enquiry in to orders, arrangement of supplies, collection for payment and also collection for statutory forms i.e. sales tax, excise duty etc. In terms of the above facts and circumstances, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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