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TMI Blog2023 (9) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between the commission agents and the Appellant. It is not the case of the Revenue that there is any legal prohibition for the Appellant- Assessee to avail services of such commission agents. It is also not the case of the Revenue that these commission agents within the meaning of the Act are entities/persons related to the Appellant-Assessee and/or they are government employees. Therefore, in our view, it is the business prerogative of the Appellant-Assessee as to whose services they should engage in the course of its business and on what terms and conditions. Most significantly, the fact that the AO and the Tribunal have allowed part of the commission payment for the purpose of business also indicates that the Revenue has accepted the services rendered by and this part of expenditure in that regard was held to be allowable. There cannot be a contradictory course of action as the Revenue needs to be consistent. It is for the AO to decide, whether, any commission paid by the Appellant-Assessee to his agents are wholly or exclusively for the purpose of his business and the mere fact that the Appellant-Assessee establishes the existence of an agreement between him and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the Appellant filed details of commission paid amounting to Rs. 26,90,104/-, which are as under:- 1. M/s. J.R.D. Legal Metal Industries Pvt. Ltd. Udaipur 11,44,920/- 2. Metson Metal Chemicals 3,13,460/- 3. M/s. Chintambi Swaminathan, Hyderabad 2,80,000/- 4. A. Mohan Menon 1,82,807/- 5. M/s. Manyam Engg. Enterprises, Hyderabad 4,50,000/- 6. M/s. Dhanashree Textiles 1,93,437/- 7. M/s. Middle East Construction Co. 79,577/- 8. M/s. Universal Supply Corp., Jaipur 45,903/- ====== 26,90,104/- 6. The Appellant Assessee also filed copies of the agreements with the aforesaid parties and justified the allowability of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Menon, the Tribunal directed to give relief of 1/3rd of the amount of Rs. 1.40 lakhs, since the said party admitted to have received an amount of Rs. 1.40 lakhs and the Appellant Assessee has not brought on record any material to explain the discrepancy in the amount shown to have been paid by the Appellant Assessee of Rs. 1,82,807/- and admitted to have been received by the recipient. With respect to other remaining parties, the Tribunal confirmed the disallowance made by the Assessing Officer on the ground that the Appellant Assessee did not furnish any evidence in support of services rendered by these commission agents. The Tribunal further observed that there should have been lot of correspondence between the Appellant Assessee and the recipient of commission and in absence of any evidence in this regard, the disallowance made by the Assessing Officer was justified. Being aggrieved by the Tribunal s order, the Appellant Assessee has filed present appeal on a substantial question of law which was formulated by this Court on 10th September, 2004. 11. Heard learned counsel for the Appellant and the Respondent and with the assistance of the counsel, we have perused the records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be interfered with by this Court under Section 260A of the Act. The Respondent further submitted that the findings of the Tribunal are based on appreciation of evidence and therefore there does not arise any question of law much less substantial question of law. The Respondent also brought to the notice of the Court Explanation 1 to Section 37(1) of the Act which was introduced by the Finance No. 2 Act of 1998 with retrospective w.e.f. 1st April, 1962. However, he fairly submitted that in the present appeal the case of the Revenue is not based on Explanation. The Respondent, therefore, supported the orders of the Assessing Officer and the Tribunal and prayed for dismissal of appeal. Analysis: 18. The Assessing Officer with respect to items at serial nos. 1, 2 and 6 to 8 reproduced hereinabove are concerned disallowed 2/3rd of the commission payment on the ground that the Appellant-Assessee could not furnish evidence about the services having being rendered. With respect to Item Nos. 3, 4 and 5 disallowed whole of the commission payment on the ground that they were acting as sub-contractors to the Appellant-Assessee and therefore no question arises to make payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment coupled with our observation made hereinabove cannot be doubted. 20. We have perused the agreement which are annexed at pages 148 to 159 of the appeal paper book. On a perusal of this agreement, the rate of commission is fixed at a certain percentage of the value of the work secured by the Appellant-Assessee with the assistance of these commission agent, however, the actual payment is made in installments/ tranches based on the events mentioned in the commission agency agreement. For example, in the agreement dated 20th August 1973, with M/s. Middle East Construction and Equipment Pvt. Ltd., the rate of commission is fixed at 3% of the total value of work secured by the Appellant-Assessee. However, the payment of said 3% is in 2 tranches, namely, 2% will be paid on receipt of 15% advance received as per the tender and the balance 1% will be paid against receipt of each running bill and the final settlement or adjustment will be made after final bills are paid by the parties, who had floated the tender. Therefore, in our view, the assessee and the Tribunal was not justified in bifurcating the commission payment as between the work done for assisting in getting the tend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons related to the Appellant-Assessee and/or they are government employees. Therefore, in our view, it is the business prerogative of the Appellant-Assessee as to whose services they should engage in the course of its business and on what terms and conditions. Most significantly, the fact that the Assessing Officer and the Tribunal have allowed part of the commission payment for the purpose of business also indicates that the Revenue has accepted the services rendered by and this part of expenditure in that regard was held to be allowable. There cannot be a contradictory course of action as the Revenue needs to be consistent. 22. It is true that it is for the Assessing Officer to decide, whether, any commission paid by the Appellant-Assessee to his agents are wholly or exclusively for the purpose of his business and the mere fact that the Appellant-Assessee establishes the existence of an agreement between him and his agent and the fact of actual payment, the discretion of an officer to consider, whether such expenditure was made exclusively for the purpose of the business is not taken away. The expenditure incurred must be for commercial expediency. However, in applying the tes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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