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TMI Blog2012 (2) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance @ 20% on this commission on the basis of his finding for A.Y. 2006-07. Order of ld. CIT (A) for A.Y. 2006-07 was confirmed by the Tribunal. Facts are similar for the year under consideration. Accordingly we confirm his finding on this issue. The ground of the assessee as well as ground of the department fails. TDS u/s 194H - Disallowance under section 40(a)(ia) - non deduction of tax on service fees retained by the bank on credit card transaction - Held that:- There is no such relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent. Technically it may be written that bank will charge certain percentage of commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit card without making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emains that purchases of more than about ₹ 4 crores remained unverifiable. None of the parties could be produced and neither there is any information about these parties. All the purchases were bogus. Therefore, the order of AO is liable to be restored on this aspect. It was also submitted that ld. CIT (A) has uphold the rejection of books of account. Therefore, also the order of AO is liable to be restored. It was also argued that if it is held that purchases are made but they were made in cash from unregistered parties, then also provisions of section 40A(3) are violated. The ld. D/R has also placed reliance on various decisions viz. 260 ITR 658 (Raj.), 250 ITR 575 (Del.) and 288 ITR 10 (SC) and also in case of Khandelwal Trading Co., 55 TTJ 261 (ITAT Jaipur), 17 ITR 355 (Orissa) and 294 ITR 316 (All.). 8. After considering the submissions and perusing the material on record, we find that there is no substance in the appeal of the department but assessee deserves to succeed in part. It is noted that in earlier year also similar purchases were made. However, no adverse inference was drawn. It is also seen that ld. CIT (A) has applied GP rate at 25.5% on the basis of decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s AO made addition of ₹ 12,50,749/- on account of disallowance of commission expenses which is restricted by ld. CIT (A) to ₹ 1,16,753/-. 11. Since both the issues are common, therefore, they are being disposed off together. 12. Brief facts of the case are that the assessee claimed sales commission payment of ₹ 1,51,57,464/- as against sales commission of ₹ 1,08,42,598/- in the last year. The AO observed that there are no written agreements with the parties. The payments have been made on self made vouchers containing name of recipient, amount of sale, corresponding bill number and commission amount. In the sales bills, there is no mention of party to whom commission is paid. No documentary evidence has been provided to establish that any service has been rendered. The sales have been increased from 17.53 crores in A.Y. 2007-08 to ₹ 22.48 crores in A.Y. 2008-09 i.e. 28.26% but the sales commission payment has been increased from ₹ 1.08 crores in A.Y. 2007-08 to ₹ 1.51 crores in A.Y. 2008-09. The assessee has claimed bogus commission payment to inflate its expenses. Therefore, he held that it would be reasonable to allow increase of 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived. In the present case, the AO has neither issued summons to any of the party nor pointed out any specific payment which is not verifiable. Hence, no disallowance out of the commission payment is warranted. 16. The assessee rate of sales commission is fixed. It pays commission at 10% on the sales routed through guide or commission agent. If there is a direct sales than no commission is paid. The position of the sales in respect of which commission is paid during the year as well as in last year is tabulated as under:- Assessment Year Commission paid Sales in respect of which commission paid Sales on which no commission was paid Total Sales 2007-08 1,51,57,464/- 15,15,74,640/- 7,32,76,428/- 22,48,51,068/- 2008-09 1,08,42,598/- 10,84,25,980/- 6,68,82,761/- 17,53,08,741/- From the above table it can be noted that the rate of sales commission is same. 17. In A.Y. 2006-07 the AO issued summon to 11 parties and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ₹ 1,16,753/- on the basis of order of Tribunal for A.Y. 2006-07. In assessment year 2006-07 the disallowance on account of commission was made by the AO. However, appeal of the assessee was allowed in part by the ld. CIT (A) as he restricted the disallowance of commission @ 20% to the parties whose summons under section 131 could not be served. In the year under consideration, there are five parties which were involved for assessment year 2006-07 to whom the commission was paid. Total commission paid to these parties was ₹ 5,83,763/- as ld. CIT (A) restricted the disallowance @ 20% on this commission on the basis of his finding for A.Y. 2006-07. Order of ld. CIT (A) for A.Y. 2006-07 was confirmed by the Tribunal. Facts are similar for the year under consideration. Accordingly we confirm his finding on this issue. The ground of the assessee as well as ground of the department fails. 21. Ground No. 3 relates to confirming the disallowance of ₹ 15,17,572/- under section 40(a)(ia) on account of non deduction of tax on service fees retained by the bank on credit card transaction. 22. Brief facts in this regard are that the assessee is having a showroom wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt/merchant discount rate (MDR)/commission retained by the bank is payment of commission liable for deduction of tax at source u/s 194H. For this, she extensively quoted from the different terms of the contract entered by the assessee with various banks held that bank represents the assessee derives his power authority to collect the money from the customer/customers bank also to deal with the appropriate card association/card issuers therefore the bank is acting as agent of assessee. However, she deleted the addition made by the AO in respect of service charges paid to American Express Bank on account of the general no deduction certificate issued to them by the Income Tax Department but confirmed the addition in respect of payment to ICICI Bank BOB for ₹ 15,17,572/-. 25. The ld. Counsel of the assessee filed detailed written submission and the factum of case was also explained. 26. On the other hand, ld. D/R has placed reliance on the orders of the AO and ld. CIT (A). 27. After considering the orders of the AO and ld. CIT (A), we find that assessee deserves to succeed in this regard. Section 194H is applicable where any commission has been paid by the P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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