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TMI Blog2019 (2) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the head incentives to an ex employee on the ground that no TDS was deducted by the assessee - Held that:- Shri Amit Kumar was an employee of the assessee till last year and in this year he was not employee for the whole time. Assessee has decided to pay him performance based salary instead of regular salary and the salary was paid in the form of incentive based on his support provided to the assessee by visiting the industries on behalf of the assessee during use of the products by the paper industry. AO has held that such an incentive has to be treated as commission and therefore, assessee was liable to deduct TDS u/s 194H. How the said incentive has been treated to be as ‘commission’ is not clear, because once assessee has said that the incentive given to his ex employee was in the nature of salary, then simply rejecting the contention without any basis cannot be sustained. Even if any commission is paid in addition of any salary or wages that also falls in the category of ‘Salary’ in terms of clause (iv) of section 17. Since the assessee has only made payment of ₹ 62,000/- to Shri Amit Kumar and his income was below taxable limit, therefore, there was no requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahesh agro foods industries, Barmer praval creative starch 59,64,832/- 3. Perfect solution 14.43% 9,00,000/- Advance Inorganics Noida, DVS Chemicals Ludhiana, Raj Gelative Industries, Ludhiana 62,36,611/- 4. Anuj Kumar Sharma 13.63% 1,50,000/- Khurana Enterprises, Rajeev Chemicals, Reinol Obs 11,00,491/- 5. Vinayak Vinod Sharma 2.86% 1,00,000/- Against sales to Aryan paper mills 35,00,000/- 3. Ld. AO held that, such a payment of commission appears to be excessive and unreasonable because commission is paid on material which common and largely prevalent and the items purchased are non-monopolistic and its availability is not limited. The assessee has paid commission @ 2.86% on the sales, whereas on the purchase commission has been paid @ 13% to 15% which itself is illogical. He had summoned u/s 131(1) to three persons, out of which, one, Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondly, similar payment of commission on purchases were made in the earlier years and in scrutiny proceedings passed us/143(3) such a quantum and rate of commission on purchases have been allowed. He also drew our attention to the related figures of turnover, purchases, gross profit, commission and net profit for year in appeal and immediately preceding year which is reproduced at page 3 of the appellate order as under :- S. No. Particulars For the year ending 31.3.2014 For the year 31.3.2013 1 Sales 2,67,45,976.00 1,87,01,484.00 2. Purchases 1,73,06,954.00 1,33,35,417.00 3. Gross Profit 76,98,999.00 46,66,429.00 4. Commission 26,50,000.00 12,00,000.00 5. Net Profit 9,90,747.00 6,42,111.40 6. %Gross profit to sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O for rejecting the assessee s claim. On the issue of disallowance of ₹ 62,000/- he submitted that, once the person was not an employee of the assessee and payment has been made as an incentive, then it falls in the nature of commission for which assessee was liable to deduct us/ 194H. 10. I have heard the rival submissions, perused the relevant finding given in the impugned order as well as material referred to at the time of hearing. It is an undisputed fact that assessee has made payment of commission to four parties, ranging between 13.63% to 15.33%. The case of the revenue is that, payment of commission is too high and excessive and, therefore, according to the AO and Ld. CIT(A) the reasonable payment of commission should be 3% . First of all, I am unable to appreciate such an approach and reasoning, because, once it is not in dispute that payment on commission is genuine transaction and it is a regular feature in the line of the assessee s business, then how Revenue can decide or disallow on the ground that expenditure incurred is excessive. Here as pointed out by Ld. Counsel that similar rate of commission was paid in the earlier year also which has been accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the risk of failure is minimum. Without their being any discrepancy or any inconsistency in his statement, AO cannot discard the said statement and proceeded to make the disallowance of such a claim of payment of commission. Under the facts and circumstances the reasoning given by the authorities below cannot be upheld and accordingly, the disallowance of ₹ 22,33,762/- is deleted. In the result ground Nos. 1 and 2 are allowed. 11. Lastly, in so far as disallowance of ₹ 62,000/- on the ground that no TDS has been deducted before us, the Ld. Counsel has submitted that Shri Amit Kumar was an employee of the assessee till last year and in this year he was not employee for the whole time. Assessee has decided to pay him performance based salary instead of regular salary and the salary was paid in the form of incentive based on his support provided to the assessee by visiting the industries on behalf of the assessee during use of the products by the paper industry. The AO has held that such an incentive has to be treated as commission and therefore, assessee was liable to deduct TDS u/s 194H. How the said incentive has been treated to be as commission is not clear, be ..... 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