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2017 (12) TMI 857

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..... as the commission to sub-agent was paid on tonnage basis. The rate at which it was paid was not in dispute. AO has not made out a case of excess payment as commission. Since the existence of subagent is proved and AO himself allowed the commission partly, it is of the opinion that the commission paid to M/s. Surya Jyothi Spinning Mills Ltd., both on third party sales as well as on own purchases has to be allowed. Coming to the payments claimed against Mr. Hanuman Das Karwa, HUF, the same is not proved. First of all, the agreement with Mr. Hanuman Das Karwa was not placed on record. The AO examined and recorded a statement and role of Mr. Hanuman Das Karwa is not forthcoming in sales made to sub-agent. It is also not understandable why Mr .....

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..... spite Appellant having established not just the genuineness but also the commercial expediency of the expenditure incurred. 2. That out of disallowed commission expenditure of ₹ 23,42,263/- a sum of ₹ 11,12,132/- pertains to Commission paid to Suryajyothi Spinning Mills Limited on PET products of Reliance Industries and the learned CIT (Appeals) erred in confirming the disallowance on basis of reply of few customers who had just stated that they have not engaged an Agent and no purchases were made from any middlemen. 3. That the learned CIT(Appeals) erred in confirming the disallowance of Commission of ₹ 3,29,461/- on PSF Products of Reliance Industries Limited paid to Suryajyothi Spinning Mills Limited only on .....

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..... M/s. Surya Jyothi Spinning Mills Ltd., has acted as sub-agent and got commission on the basis of tonnage and Mr. Hanuman Das Karwa, HUF acted as sub-agent in sales to M/s. Surya Jyothi Spinning Mills Ltd. AO recorded statement from Mr. Hanuman Das Karwa and found that no services are rendered. As far as M/s. Surya Jyothi Spinning Mills Ltd., is concerned, AO partly allowed the commission i.e., on those parties who confirmed the role of sub-agent and denied the expenditure to an extent of ₹ 23,42,263/-. 3. Ld.CIT(A) examined the issue and confirmed the order of AO after elaborately discussing the issues, under the heads commercial expediency, genuineness and finally concluded as under: 06.6. In view of the foregoing discussio .....

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..... in its business. 5. Ld.DR, however, defended the order of AO and CIT(A). 6. I have considered the rival contentions. For any claim of expenditure, it is necessary to prove that the expenditure is wholly and exclusively for the purposes of business. Looking in that context, the receipt of commission from Reliance Industries on direct sales made by that company to M/s. Sri Sarvaraya Sugars Ltd, do indicate that assessee has acted as agent of that company. Role of M/s. Surya Jyothi Spinning Mills Ltd., a public limited company as sub-agent also cannot be denied as the some parties confirmed and AO himself has allowed expenditure of commission payments to M/s. Surya Jyothi Spinning Mills Ltd on those sales. Since the AO accepted the exis .....

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..... te that claim of commission to Mr. Hanuman Das Karwa on sales to M/s. Surya Jyothi Spinning Mills Ltd., is not genuine. Assessee failed to justify the claim before authorities. I am of the opinion that the AO/CIT(A) is correct in disallowing the amount. To that extent, the claim of payment of commission on sales made to sub-agent itself stated to have been done through Mr. Hanuman Das Karwa, HUF is not genuine on the facts of the case. The grounds to that extent are rejected. 8. AO is directed to allow the commission paid to M/s. Surya Jyothi Spinning Mills Ltd. Grounds are allowed partly. 9. In the result, appeal of assessee is partly allowed. Order pronounced in the open court on 8th December, 2017 - - TaxTMI - TMITax - .....

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