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TMI Blog2017 (7) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... nding commission payable continues to be shown as liable in the books of account which have never been rejected by the AO. In these circumstances, genuineness of the business transaction and payment made to the service agent cannot be disputed Observation made by the AO that no invoice below has been raised by the service agents which makes the business transaction doubtful is not tenable because when as per agreement, commission @ 4% or 10% in case of different agents, as the case may be, is already agreed upon between the parties on the goods exported and services have been rendered and export contracts stands executed, we do not find any reason to disallow the claim only because of the fact that invoices have not been raised by the service agents. Even otherwise, when assessee company has categorically spread its income into 3 years then expenditure have also to be spread in 3 years and the disallowance cannot be made on the ground that the amount of agency commission was payable even during 2010. The contention of the ld. DR that no document / correspondence is there on record to prove that as to what services have been rendered by the service agents, is again not tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,09,398.93 to different service agents as commission. To verify the genuineness of the services rendered, assessee was called upon to produce the copy of agreement entered with the service agents as well as invoice raised by the service agents with the details of the nature of transaction entered between them. Assessee furnished statement showing the FOB value of the exports to the parties where agency commission is payable along with statement of commission showing commission paid/payable during AY 2006-07 in respect of the exports made and the outstanding commission payable continued to be shown in the liability of the books of account. Finding the explanation furnished by the assessee not tenable, AO came to the conclusion that this explanation is not acceptable because such commission cannot remain unpaid even after lapse of three years and as such, genuineness of the business transaction and payment made to the service agents is not proved and as such, amount of ₹ 7,33,09,398.93 is added back to the total income of the assessee. 4. Assessee carried the matter before the ld. CIT (A) by filing the appeal who has deleted the addition of ₹ 7,33,09,398/- made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the different services agents, details thereof is as under :- Name of the commission agent Amount ESBJ Trading Invt . , Singapore 6425066 . 97 Kwame Okyere Akosa, Ghana 5163118 Solis Intertrade Inc 2449824 Trans Engg . Co . , Sudan 37489183 . 96 TEODA Engg . Ghana 17055087 Mamoom Gamal Sudan 1248338 Soils Inter Trade Inc . B . Faso 2449824 Amount paid below 5 lacs 1028957 Total 733093398 that the services agents to whom the commission was allegedly paid have not raised any invoice for the services rendered by them; that in the Volkar Committee Report in connection with UN Oilfor - Food Programme for Iraq, the name of M / s . Mohan Exports India Limited, the assessee in this case, figured as a contractor for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and the agent commission is to be paid after receipt of payment by the assessee for the goods exported (ii) that moreover the provision of commission expenses payable were to be made under the mercantile system of accounting as the assessee had accounted for export sales and corresponding expenditure had to be provided to match cost with revenue in order to arrive at the actual commercial profit; (iii) that even otherwise, the export proceeds were to be realized in 36 monthly installments starting after 12 months from the mean date of shipment i.e. May 2007 onwards and in these circumstances, the part of the commission payment had to remain payable at the time of assessment proceedings or thereafter; (iv) that as per RBI Guidelines, the payment of commission has to be allowed by the designated bank either way of remittance or by deduction from invoice value on the application of the exporter. This condition laid down by RBI is to check the genuineness of the business transactions and payment made to the service agent; (v) that the second ground for disallowing the claim of payment of commission to the service agent that the agreement does not suggest any speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Advance payment other Financial matters 2.4 Pursue amendments to contracts 2.5 Arrange for getting technical details / drawings samples approved by NEC 2.6 Keep the assessee informed of all relevant developments 2.7 Organise and plan the visit of NEC Technical personnel to India for discussion 2.8 Visit India for discussion 2.9 Coordinate clearance of goods at the Port and their transportation to site. 2.10 Arrange for receipts of goods by NEC and formalities for insurance / claim if any. 2.11 Pursue with NEC for release and cancellation of performance and advance guarantees 2.12 To arrange for local services like Visa, Govt. Clearances, formalities in Banks etc. 2.13 Assist site office like arranging local transport, accommodation etc. 2.14 Co-ordination with local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 2.15 Provide services during warranty period 2.16 Assistance in executing contract and after sales services. 5 Mamoun Gamal M/s. Medicana for Investment and Services, P.O. Box 1443 Khartoum North, Sudan (Agreement dt. 02.03.04) 2 For Ministry of Science and Technology ( a) Maintain close and constant liaison (b) Advise assessee of all new tenders and business opportunities (c) Procure tender documents and courier them (d) Obtain technical information clarification, to receive bids form assessee and submit than (e) Follow up of offers submitted by assessee (f) Pursue establishment of L/c and amendments (g) Pursue amendments to contracts (h) Arrange to get details / drawings and samples of items (i) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company has been making payment of such agency commission in the preceding years right form FY 2000-01 to FY 2004-05, as is tabulated in para 6, which have been allowed by the Revenue and the agency commission paid during the year is commensurate to the turnover of the year under assessment when compared with the preceding years; (xi) that undisputedly, there is no change in the agreement entered into between assessee company and service agents and since, in the earlier years, such agency commission has been allowed by the Revenue, the rule of consistency is also to be applied; (xii) that since the assessee company is executing various projects overseas and not into trading, the same cannot be executed except with the constant services to be provided by the local agents by making liaison with the overseas Government Departments / Agencies / undertakings; (xiii) that even otherwise, as per RBI Guidelines, commission cannot be remitted in any circumstance before shipment of the case which are subject matter of the export, that too through the authorized bank; (xiv) that it is a matter of record that out of total payment of ₹ 7,08,59,575/- on account of commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TOTAL SALES 1,67,68,66,065.25 It is apparently clear that no export whatsoever has been made by the assessee company to Iraq and in these circumstances, the question of making payment of illegal gratification to Saddam Hussain and his close associates does not arise; (xvii) that when the assessee has made export to the countries other than Iraq Volkar Committee Report has no bearing whatsoever qua the assessee company pertaining to the year under assessment; (xviii) that when no export during the year under assessment has been made by the assessee to Iraq, the reliance by the AO on Volkar Committee Report which undisputedly contains the name of the assessee company, is highly misconceived and misplaced; (xix) that so far as disallowance of amount of ₹ 10,28,957/- by the AO on account of commission expenses below ₹ 5,00,000/- is concerned during appellate proceedings, the ld. CIT (A) has entertained additional evidence by calling remand report from the AO and came to the conclusion that disallowance cannot be made and we find no illegality or perversity in the findings returned by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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