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TMI Blog2018 (8) TMI 1881X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient evidence on the record to justify that it was a commercial transaction between the parties not only in assessment year under appeal but in preceding and subsequent years, therefore, the authorities below were not justified in invoking provision of section 2 (22) (e) of the IT Act against the assessee for making the addition. We set aside the orders of the authorities below and delete the addition. This ground of appeal of the assessee is allowed. Disallowance on account of labour charges - HELD THAT:- We are of the opinion that addition is ad-hoc in nature and cannot be sustained. The Tribunal in A. Y. 2010-11 [ 2018 (8) TMI 1880 - ITAT DELHI] deleted similar addition vide order of even date. The assessee explained the reasons for variations, we, therefore delete the addition of 3,00,000/-. This ground of appeal of assessee is allowed. Addition on account of commission u/s 37 (1) - HELD THAT:- The assessee has incurred above expenses wholly and exclusively for the purpose of business, same is allowable deduction. The financial results of the assessee are better as compared to earlier years and subsequent years, therefore, there were no reason for assessee to inflate the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly made. The Ld. CIT (A) noted that the assessee do not produce any evidence or the documents on the basis of which the assessee claimed it was a transaction between two persons, the addition accordingly confirmed. 5. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below. 6. The Ld. Counsel for the assessee submitted that assessee has been carrying on business on a works contract for Government Departments under partnership concern M/s S.L. Enterprises. The assessee holds share holding more than 10% in M/s Ramsan Communication Limited. During the year there were commercial transactions between the assessee and the said company which is clear from ledger account of the said company in the books of the assessee. It would show the amount paid by assessee to said company and the amount received by the assessee for the said company. Copy of which is filed at page 54 of the paper book. The credit amount comes to ₹ 1,36,95,724/- and debit amount is of ₹ 24,00,000/-, thus the balance outstanding was ₹ 1,12,95,724/-. Since it was a commercial transaction, the assessee has paid interest of ₹ 1,06,360/- and has deducted TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 2(22) (e) is made in the case of an assessee who is an individual. Admittedly, no advance or borrowed money is received by the assessee from the concerns in which the assessee is a shareholder. There is a transaction of advancing of money by M/s Superior Films (P) Ltd. to the group concerns in the normal course of business. In view of the above decision of Hon'ble High Court of Calcutta as well as CBDT's Circular, Section 2(22)(e) is not applicable in the facts of the case under appeal before us. We, therefore, respectfully following the above decision of Hon'ble High Court of Calcutta as well as CBDT's Circular, delete the edition made u/s 2(22)(e) of the Act. 7. He has refer to page No. 94 of the paper book which is ledger account of interest received and paper book page No.98, the details of interest paid from A. Y. 2006-07 to A. Y. 2014-15. The Ld. Counsel for assessee submitted that similar amount was advanced in earlier years as well as in subsequent years on which no addition have been made. Copy of the ledger account is also file in 117 of the paper book. Ld. Counsel for the assessee, therefore, submitted that it has been consistency held that a transaction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed that the assessee has entered into an agreement to sell with M/s. Ramsan Communication Limited for sale of the industrial land in Delhi. They wanted to shift their business to Delhi, therefore, advance of ₹ 1.12 crores was treated against the purchase of industrial plot. The assessee deducted TDS on the interest paid (PB-95), therefore, it was a commercial transaction entered into between into between assessee and M/s. Ramsan Communication Limited. Section 2 (22) (e) of the IT Act was inserted to bring within the purview of taxation all those amounts which are actually a distribution of profits but are disbursed as loan. Further it is pertinent to note, when dividends are declared by a company, it is solely the shareholders, who benefit from the transaction, thus section 2 (22) (e) of the Act, covers only such situation where the shareholder alone benefits from the loan transaction, whereas if the company receives some benefits, it would termed as a commercial transaction. In the instant case, the loan was given to the assessee for further expansion of business as the said company intended to take over the business of the assessee hence would be an indirect beneficiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d contractor disallowed ₹ 3,00,000/-. The Ld. CIT (A) on the same reasoning confirmed the addition because most of the payments are made in cash and there are discrepancy like non availability of names, address and signatures on the receipts. 11. The Ld. Counsel for assessee submitted that it is an ad-hoc addition, without brining any material against the assessee. No disallowance have been made in earlier order as well in subsequent year. ₹ 1,50,000/- was only disallowed in preceding assessment year 2010-11 which is under challenge in appeal separately. 12. On the other hand Ld. DR heavily relied on the orders of the authorities below. 13. After considering the rival submissions, we are of the opinion that addition is ad-hoc in nature and cannot be sustained. The Tribunal in A. Y. 2010-11 in ITA No.5594/2014 deleted similar addition vide order of even date. The assessee explained the reasons for variations, we, therefore delete the addition of ₹ 3,00,000/-. This ground of appeal of assessee is allowed. 14. On ground No.3, assessee challenged the disallowance of ₹ 29,34,000/- on account of commission u/s 37 (1) of the IT Act. The Assessing Officer ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is no relation between assessee and the commission agents. The similar commission payment was paid in earlier year as well as in subsequent years which has not been disputed by the Assessing Officer. The assessee deducted the TDS on the amount paid and issued TDS certificate. The assessee works for the Government Departments, therefore, the commission agents represent the assessee before the agencies on behalf of the assessee and in lieu thereof the commission have been paid. Confirmation and TDS certificate have been filed. The assessee explained the reasons for payment of commission. If Assessing Officer was not satisfied with the explanation of assessee, he could have summoned the commission agents u/s 131 to verify the transaction. The assessee had discharged the burden of proving genuineness of payment made to commission agents. No enquiry made by the Assessing Officer on the documentary evidence filed by the assessee. He has relied upon the order of Tribunal in the case of Mobile Communication (India) P. Ltd. Vs. DCIT, 125/ITD /309 (Delhi) in para 10.1 in which the Tribunal referred to its decision in the case of Nestor Pharmaceuticals Ltd. V. DCIT [IT Nos. 2535 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to complete the work by giving presentation before the different agencies of the government. The assessee explained that the commission was paid to various parties to represent the assessee before various agencies for completion of the work taken on behalf of the assessee. The assessee explained actual services have been rendered by the commission agent in the course of business of the assessee. It has also not been disputed that the agents had confirmed the rendering of services. It is also not in dispute that commission expenses incurred and paid by assessee. The commission agents are not related to assessee. The nature of business of assessee is same as was in earlier years as well as in subsequent years. The Assessing Officer has accepted the similar payment of commission in earlier year as well as in subsequent years and no disallowance have been made. Thus, the rules of consistency do apply in the facts and circumstances of the case. If the Assessing Officer had any doubt on the explanation of the assessee, he could have verified the facts by summoning the commission agents but Assessing Officer did not make any enquiry from the commission agents. The Assessing Officer disal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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