Commission payments disallowed for 2005-06, allowed for 2006-07. Revenue appeal dismissed.

The disallowance of commission paid to agents for transactions where no commission agents were involved was upheld for the assessment year 2005-06, while other commission payments were deemed allowable. In contrast, for the assessment year 2006-07, all commission payments were considered genuine and allowable as business expenditure. The Revenue's appeal for the year 2006-07 was dismissed, affirming the Tribunal's decision.

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Issues Involved:
- Disallowance of commission claimed as revenue expenditure under Section 37(1) of the Income Tax Act, 1961 for assessment years 2005-06 and 2006-07.

Analysis:

Assessment Year 2005-06:
1. The Revenue contested the deletion of a portion of the addition made by the Assessing Officer on account of commission paid to agents for the sale of machinery. The Tribunal upheld the deletion made by the Commissioner of Income Tax (Appeals).
2. The key issue was whether the commission paid by the assessee qualified as business expenditure under Section 37(1) of the Income Tax Act, 1961. The Revenue argued that evidence showed no involvement of commission agents in transactions with seven buyers, shifting the burden to the assessee to explain the claimed business expenditure.
3. The Tribunal had based its decision on a previous year's case, which had different facts. In the current assessment year, evidence from buyers indicated no commission agents were involved in some sales. As the assessee failed to explain or provide evidence to the contrary, the commission paid for these transactions was disallowed as business expenditure.
4. However, for other payments of commission, no evidence was presented by the Revenue to dispute their authenticity. Therefore, the Tribunal's decision to allow these payments as business expenditure was upheld. The disallowance was limited to the seven buyers where no commission agents were involved.

Assessment Year 2006-07:
1. The facts for this assessment year were similar to 2004-05, with no evidence suggesting non-genuineness of commission payments. Unlike 2005-06, there was no indication from buyers that commission agents were not involved.
2. The Tribunal found no grounds to question the genuineness of commission payments for the year 2006-07, considering all relevant evidence. As a result, the entire amount of commission paid to agents in this year was deemed allowable as business expenditure.
3. Since no substantial question of law arose for the assessment year 2006-07, the Revenue's appeal was dismissed, and the Tribunal's decision was upheld.

In conclusion, for the assessment year 2005-06, the disallowance of commission paid to agents for transactions where no commission agents were involved was upheld, while other commission payments were deemed allowable. For the assessment year 2006-07, all commission payments were considered genuine and allowable as business expenditure, leading to the dismissal of the Revenue's appeal for this year.

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