Disallowance of sales commission paid to two Associated ...

Disallowance of sales commission to AEs; onus on assessee for documentation. CIT(A) remitted for fresh adjudication. Upheld allowance for Heubach & Darlington.

Case Laws     Income Tax

October 11, 2024

Disallowance of sales commission paid to two Associated Enterprises (AEs) being foreign entities - assessee failed to discharge the onus of proving legitimate business requirement and genuineness of payment by submitting relevant documentary proof. CIT(A) deleted the addition without calling for a remand report from the AO, violating Rule 46A. Matter needs to be restored to CIT(A) for adjudicating sales commission again. Sales commission paid to Heubach GMBH - assessee discharged onus, Revenue failed to provide cogent material to disallow, CIT(A)'s order upheld. Sales commission paid to Darlington Enterprises - assessee discharged onus, Revenue failed to provide cogent material to disallow, CIT(A)'s order upheld. Undervaluation of finished/closing stock of Beta Blue - assessee applied weighted average cost method of yearly costs for finished stock and monthly costs for WIP. AS-2 requires fairest approximation of cost incurred. Matter set aside to AO to determine reasons for adopting different methods and allow assessee to justify, after verifying consistent practice and Revenue's acceptance.

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