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TMI Blog2011 (2) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... alves. The sales being made by the assessee can be categorized mainly into four major sectors:- (a) Original equipment manufacturer (vehicle manufacturers), (b) After market through distributors, (c) State Transport Undertakings (d) Exports. During the course of assessment proceedings, it was noticed by the AO that the assessee had incurred a commission of ₹ 3.42 crore and discount of ₹ 7.76 crores and claimed the same as deduction during the year under consideration. Out of the total commission paid, the assessee paid commission of ₹ 26,61,214/- to various agents in respect of sales made to State Transport Undertakings/Vehicle Factory, Jabalpur/D.G.S. D. The AO has taken a view that this payment of commission indicates that the assessee has spent the amount on account of procuring orders from State Transport Undertaking and Vehicle Factory, Jabalpur. The Assessing Officer further stated that these undertakings are all Government Undertakings having fixed set of rules for placing of orders which are on the basis of rules framed by such undertakings and there could be no reason of any services which could have been rendered by the assessee s agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e copies of agreements and renewals thereof entered into with Agents. In the chart of details of commission paid to agents on sale made to State Undertaking, the assessee has given the names and addresses of the agents and the amount of sales on which the commission was paid. The assessee has also specified the rate of commission paid to commission agent with reference to sales. From the chart, it is also seen that certain payments were made on account of reimbursement of freight expenses or other expenses incurred by the agent for and on behalf of the assessee. Additional commission has also been paid on achievement of sales target. From the chart, it is seen that the agents have been appointed in respect of the business of sales of various parts to State Road/Municipal Transport Corporation/Undertakings in the State of Andhra Pradesh, Tamil Nadu, Jammu, Karnataka, Gujarat, Mumbai, Uttar Pradesh, Madhya Pradesh, Punjab, Haryana etc. The names of the commission agents to whom commission has been paid are, inter alia, following:- (1) Jai Motors Ltd. of Hyderabad, Chennai, Ernakulam etc. (2) National Trading of Jammu. (3) Upper India Trading of Bangalore. (4) Reema Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities, prices and supplies, completely following up with the buyers till realization of full payment of bills raised and submit monthly reports. The payments have been made to agents directly and not to Government agencies or Undertakings or to the officers of the State Government Undertakings. The payment has been made to business enterprises for the aforesaid services rendered to the assessee company. The company has engaged these agents for performing the aforesaid activities in consideration thereof the assessee has paid commission to agents. No illegal gratification has been paid to any officer of the State Government Undertaking or any public department. In the present case, the agents have been employed to procure orders from the State Undertaking on predetermined prices and to ensure proper delivery of goods and realization of full payment of the bills raised. The agent has also provided regular feed back about competitors activities, prices and supplies. We further find that the assessee had received rate contract approval from Association of State Road Transport Undertaking, the body which allots rate contracts for supplies to all State Transport Undertaking, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Paper Book, it appears to us that the Association of State Transport Undertaking was a body formed, which floats tenders on behalf of the State Transport Undertaking and approves rate contract. After this approval by Association of State Transport Undertaking, the transaction for supply of parts by approved parties or suppliers was done directly with the concerned State Transport Undertaking. Therefore, the role of association was broadly to approve the rates and suppliers. The submission of tender, delivery of goods and realization of prices is not a simple one day work or matter where a particular item was sold at the spot and the payment was collected. It is continuous process where orders were placed by different suppliers approved by Association of Road Transport Undertaking as per the demand of the concerned State Transport Undertaking. Supply of required parts to State Transport Undertaking had to be ensured by the supplier. Any problem arising with the time schedule, item verification and quality of product had to be discussed and deliberated upon on regular basis with the officers of the State Transport Undertaking by the assessee/supplier or its agent. It is not in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment has relied upon the various decisions as under:- (i) Swadeshi Cotton Mills vs. CIT (1967) 63 ITR 56 (SC). (ii) Laxminarayan Madanlal vs. CIT (1972) 86 ITR 439 (SC). (iii) CIT vs. Premiere Breweries Ltd. (2005) 279 ITR 51 (Kerala). (iv) Precision Electronics Ltd. Vs. DCIT (2006)-TIOL-38 ITAT-Del. (v) M/s. Precision Electronics Ltd. Vs. DCIT (2007)-TIOL-245-HC. (vi) Saga Departmental Stores Ltd. Vs. CIT in ITA No.162/2009 dated 10.8.2009 (Delhi High Court). (vii) Schneider Electric India Ltd. Vs. CIT, 304 ITR 360 (Del). (viii) M/s. Nuware India Ltd. Vs. DCIT (2009) 118 ITD 70 (Del). 11. We have gone through these decisions and analyzed the same in the light of the facts of the present case. There is no quarrel as to the proposition that merely because of the existence of an agreement between the assessee and his agents for payment of certain commission, and fact of the actual payment, the Assessing Officer is not bound to hold that the payment was made exclusively and wholly for the purpose of assessee s business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view we have taken above a reference may be made to a decision of coordinate Bench of Tribunal, Delhi `I Bench in the case of ACIT vs. Jindal Saw Pipes Ltd. Reported in (2008) 118 TTJ (Del) 228, where the Tribunal after applying the decisions in the cases of Dhirajlal Girdharilal vs. CIT (1954) 26 ITR 736 (SC), Omar Salay Mohamed Sait vs. CIT 1959) 37 ITR 151 (SC), Dhakeshwari Cotton Mills Ltd. Vs. CIT (1954) 26 ITR 775 (SC) and Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) has held and observed as under:- 5(vii) The Board s Circular No. 772, reproduced above, clearly explains the legislative intent, purposes and object and targeted expenditure, covered under the said Explanation. The Speech of the Finance Minister, as extracted and reproduced above, also highlights the legislative intent, for insertion of the said Explanation. The Revenue has failed to justify applicability of the said Explanation to the fact-situation of the said case, by leading reliable, cogent and corroborative evidences. The clear and unambiguous language of the said Explanation, rules out the applicability of the same, to the present case, as held by the learned CIT(A). 5(viii) The CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and submissions. Having regard to the above legal and factual discussions, there is no reason and justification to warrant any interference with the findings of the CIT(A), based on proper appreciation of the legal and factual position of the case, as discussed in detail in the impugned appellate order. Consequently, the order of the CIT(A), on this ground, is upheld. 13. Ground No.2 raised in Assessment Year 2000-01 is directed against the CIT(A) s order in confirming the disallowance of cash payment of ₹ 18,515/- made by the company. 14. We have heard both the parties and perused the material on record. The assessee had claimed expenses of ₹ 1,13,790/- which were paid in cash. The assessee has given a reason for making the payment in cash that the assessee was having no bank account in Delhi, Mumbai, Lucknow and Patiala where the payment was made to payees. Applying the provisions of sec. 40A(3), the Assessing Officer disallowed 20% of the total payment. Thus, the AO disallowed ₹ 22,758/- being 20% of the expenses of ₹ 1,13,790/- paid in cash. 15. Being aggrieved, the assessee objected only to the disallowance of ₹ 18,515/- being 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court decision in the assessee s own case for the Assessment Year 2000-01. ITA No.1762/Del/2004 19. Now, we shall come to appeal pertaining to the Assessment Year 2001-02. 20. Ground No.1(a) 1(b) relating to the disallowance of payment of commission to various agents amounting to ₹ 35,36,377/- is identical and similar to the ground raised in the Assessment Year 2000-01. 21. Facts and circumstances relating to this ground in this Assessment Year are totally identical to that of the Assessment Year 2000-01. This position has also been conceded to by both the parties. Therefore, following our order on this issue in the Assessment Year 2000-01, we delete the disallowance of payment of commission to various agents. In other words, the AO shall allow the assessee s claim of deduction on account of commission payment to various agents and modify the assessment order accordingly. 22. Ground No.2(a) and 2(b) is directed against the CIT(A) s order in confirming the disallowance of employees contribution to PF/ESI account amounting to ₹ 12,70,070/- due in the month of March, 2001 but paid in the month of April, 2001. 23. This issue is squarely covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to the disallowance of unpaid employer s contribution of PF/ESI of ₹ 10,68,100/- due in the month of March, 2002 to pay in the month of April, 2002. 32. In the light of our order on the identical point in the Assessment Year 2001-02, where this issue has been decided in favour of the assessee after following the Hon ble Supreme Court in the case of CIT vs. Vinay Cement (supra) and Hon ble Delhi High Court decision in the case of Emil Ltd. (supra), we delete this disallowance and direct the AO to allow the assessee s claim of payment of employer s contribution of PF/ESI amounting to ₹ 10,68,100/- inasmuch as the same has been paid within due date of the filing of return of income. 33. Ground No.3(a) and 3(b) regarding inclusion of other income except interest on bank deposits and security deposits in the total turnover for the purpose of computing deduction under sec. 80HHC is identical to the ground No.3(a) and 3(b) in the Assessment Years 2000-01 and 2001-02. In the light of our this order pertaining to the Assessment Years 2000-01 and 2001-02, we allow this ground of the assessee with direction to the AO to exclude other income from the total turnover f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was followed in Assessment Year 2000-01. Since the issue is covered by the earlier decision of Tribunal which has been affirmed by the Hon ble High Court, we reject this ground raised by the revenue. 41. Ground No.3 is directed against the CIT(A) s order in deleting the addition of ₹ 1,56,16,310 made by the AO on account of research and development expenses. 42. The assessee has claimed deduction of ₹ 1,87,53,790/- in respect of expenditure incurred on Research Development. The AO disallowed the expenses to the extent of ₹ 1,56,16,310/- by treating the same to be of capital in nature. 43. In the course of hearing of this appeal, it was pointed out that similar disallowance made by the AO was deleted by the Tribunal in assessee s own case for the Assessment Year 1998-99 which has been affirmed by the Hon ble High Court by not admitting any reference as according to the Hon ble High Court, no substantial question of law arose. Reference made by the department was again rejected in Assessment Year 2000-01 by the Hon ble High Court on this issue. The learned CIT(A) has deleted the addition by following the Tribunal s decision in assessee s own case in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the AO to allow the total payment of commission paid by the assessee to various agents and not to restrict the same to the extent of 4.5%. Thus, this ground raised by the assessee is allowed and that of the revenue is rejected. ITA No.4005/Del/2006 48. In the assessee s appeal, ground No.2(a) and 2(b) is taken against the CIT(A) s order in confirming the AO s action in including other income in total turnover for the purpose of computing deduction u/s 80HHC of the Act. This issue is decided in favour of the assessee in the light of this common order pertaining to the Assessment Years 2000-01 to 2002-03. We, therefore, direct the AO to exclude other income from the total turnover for the purpose of computing deduction under sec. 80HHC. 49. Ground No.3 is directed against CIT(A) s order in confirming the disallowance of software expenses for purchase of computer software of ₹ 29,11,506/- by treating the same to be of capital in nature. 50. We have heard both the parties and perused the material on record. This issue has to be examined afresh by the AO in the light of the proposition laid down by the Special Bench of Tribunal in the case of M/s. Amway India E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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