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TMI Blog2018 (12) TMI 1658X X X X Extracts X X X X X X X X Extracts X X X X ..... by law as has been observed by him. AO is further directed to ascertain whether such expenses are legitimate and also whether payment of such commission is against public policy of the government. The assessee is also directed to explain whether such agents are registered with the respective government department/PSUs for which they have been paid commission. Section 37(1) contains the general provisions of allowance. The assessee is directed to produce the necessary evidence in support of its claim because as per section 37(1) explanation-1, any expenditure incurred by the assessee for any purposes, which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and shall not be allowable. Thus, the appeal of the Revenue is allowed for statistical purposes. - ITA Nos.1409 & 1410/Mum/2016 Assessment Years: 2008-09 & 2010-11 - - - Dated:- 11-12-2018 - Shri Joginder Singh and Shri Manoj Kumar Aggarwal, JJ. Revenue by: Shri D.G. Pansari-DR Assessee by: Shri Deepak P Tikekar ORDER Joginder Singh, These two appeals are by the Revenue against the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding, service and support of pumping and fluid-handling system. The assessee has shown expenditure of ₹ 1,47,45,000/- under the head of commission. On asking, the assessee furnished the details of commission to the agents interconnected with the National Thermal Power Corporation, Bharat Heavy Electricals, National Fertilizers, Powertech Corporation, Bharat Heavy Electricals, National Fertilizers, Powertech Corporation, National Dairy Development Corporation, Goa Shipyard, INS Gomati, Controller of Procurement, Gujarat State Energy Corporation and Vasantrao Dada Patil Sahakari. The Assessing Officer was of the view that no middle man was permitted for the transaction with Government organization and public sector, therefore, the said commission was not allowable hence added to the income of the assessee. Feeling aggrieved, the assessee filed the appeal before the CIT(A) who confirmed the said addition, therefore, the assesse has filed the present appeal before us. ISSUE NO.1:- 4. At the very out set the learned representative of the assessee has argued that the assessee wanted to adduce the additional evidence in support of his claim, therefore, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in all fairness, the penalty appeal is also restored to the file of the ld. Assessing Officer for fresh consideration in accordance with law. Thus, this appeal of the Revenue is allowed for statistical purposes. 3. Now, we shall take up the appeal for Assessment Year 2010-11 (ITA No.1410/Mum/2016), wherein, the addition on account of commission paid to agents for obtaining orders from government agencies has been challenged on the plea that such payments to the governments agencies is prohibited by law and thus not allowable deduction under section 37(1) of the Act. The ld. DR contended that such payment of commission is against the public policy, therefore, it cannot be allowed as the same is prohibited by law. On the other hand, the Ld. counsel for the assessee contended that on similar facts for Assessment Year 2007-08 (ITA No.7250/Mum/2010) vide order dated 15/02/2013, the Tribunal allowed the same as business expenditure in the case of M/a Arco Electro Technology Pvt. Ltd. vs ACIT. The ld. counsel furnished the copy of this order. 3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of any agent in the particular order of BHEL. The Ld. Assessing Officer further observed that engaging agents to obtain sale order from the government agencies is prohibited and thus payment made to any middle men is also prohibited. Thus, it is nothing but kickback and violation of law, consequently, the claimed expenses were declined by the ld. Assessing Officer. On the other hand, before the Ld. Commissioner of Income Tax (Appeal), the assessee took the plea that the Ld. Assessing Officer has not pointed out as to which public policy was violated. It was observed by the Ld. Commissioner of Income Tax (Appeal) that in fact services were rendered by these agents and thus the commission paid to them was justified. The Ld. Commissioner of Income Tax (Appeal) has also mentioned the decision of the Tribunal in the case of M/s Arco Electro Technology Pvt. Ltd. (ITA No.7250/Mum/2010) and finally concluded that such commission payment cannot be disallowed. However, the Ld. Assessing Officer has observed that the assessee is supplying its goods to government agencies/PSUs and commission have been paid to agents for getting sales contracts from BHEL. The assessee tried to explain the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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