Revenue Department challenges disallowance of excessive remuneration paid to dealers - A.Y. 2006-07

The revenue department appealed against the CIT(A)'s decision to delete the disallowance of excessive remuneration paid to dealers for A.Y. 2006-07. The AO had disallowed a balance payment of Rs. 89,98,913 as unreasonable. The CIT(A) directed the AO to delete the addition based on the previous year's order, where it was deemed justified for business purposes. The department argued against comparing remuneration paid in previous years, leading to a remittance for fresh examination without past comparisons. Ultimately, the department's appeal was treated as allowed for statistical purposes, with the order pronounced on 30-11-2009.

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Issues involved: Disallowance of excessive payment of remuneration to dealers.

Summary:
The appeal by the revenue was against the order of the CIT(Appeals) for A.Y. 2006-07, where the only effective ground raised was the deletion of disallowance of excessive remuneration paid to dealers. The AO disallowed the balance payment of remuneration, amounting to Rs. 89,98,913, as unreasonable and excessive.

Before the CIT(A), the assessee relied on the previous year's order, where it was observed that the expenditure was for business purposes and not capital, personal, or bogus. The AO's restriction of remuneration paid was deemed unjustified, as the appellant had paid a lesser percentage of remuneration compared to commission received in previous years.

The CIT(A) directed the AO to delete the addition made, following the previous year's order. The department appealed, arguing that the remuneration paid in earlier years should not be compared to the current year due to changes in business setup. The matter was remitted to the AO for fresh examination without reliance on past remuneration comparisons.

Ultimately, the appeal of the department was treated as allowed for statistical purposes, with the order pronounced on 30-11-2009.

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