Tribunal decision upheld on excessive commission disallowance under Income-tax Act

The High Court upheld the Tribunal's decision to delete the disallowance of excessive commission paid by the assessee under section 40(A)(2) of the Income-tax Act. The Court emphasized the importance of establishing nexus and genuineness of expenditure, dismissing the assessing authority's attempt to dictate the commission rate. The argument regarding undisclosed business activities was rejected for failing to prove non-payment or excessiveness of commission. Ultimately, the appeal was dismissed as no substantial question of law was identified.

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Issues involved: Disallowance of excessive commission paid by the assessee u/s 40(A)(2) of the Income-tax Act.

Summary:
The assessee, engaged in manufacturing moulded plastic items, claimed to have paid commission to agents at 8.65%, disallowed by the Assessing Officer as excessive. The AO allowed deduction at 2.65% only. The CIT(A) later deleted the addition, which was affirmed by the Tribunal based on findings of nexus between expenditure and business, genuineness of expenditure, and absence of evidence of siphoning off money. Relying on precedent, the Tribunal held the AO's addition was unsustainable. The High Court upheld this view, stating that once nexus and genuineness were established, the assessing authority could not dictate the commission rate. The argument that undisclosed business activities affected commission payment was dismissed, as it did not prove non-payment or excessiveness of commission u/s 40(A)(2). No substantial question of law was found, leading to the dismissal of the appeal.

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