2018 (2) TMI 2088 - HC - Income Tax

High Court Upholds Commission Expenses for Business Transactions

The High Court upheld the decision of the Income Tax Appellate Tribunal, affirming the legitimacy of commission expenses claimed by the assessee for the ... Addition of commission expenses - Commissioner of Income Tax (Appeals) allowing the commission expenses disallowed by AO - ITAT dismissed the appeal filed by the revenue and upheld the order passed by the Commissioner of Income Tax (Appeals) - HELD THAT:- As in earlier assessments the same was accepted by the Assessing Officer for Assessment Years 1992-93, 2007-08 and 2008-09, we are of the view that order passed by the learned Income Tax Appellate Tribunal, Indore Bench, Indore is just and proper, in view of the law laid down by this Court in case of Commissioner of Income Tax v. Pure Pharma [2004 (3) TMI 31 - MADHYA PRADESH HIGH COURT] No case to interfere with impugned order passed by the learned Appellate Tribunal, as prayed for, is made out; nor any substantial question of law is arising in these appeals. Issues involved:- Justification of allowing commission expenses disallowed by the Assessing Officer.Detailed Analysis:1. The primary issue in the income tax appeals was whether the Commissioner of Income Tax (Appeals) was correct in allowing the commission expenses that were initially disallowed by the Assessing Officer. The appellant, the Department, filed three appeals under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal affirming the findings of the Commissioner of Income Tax (Appeals) for the assessment years 2008-09, 2009-10, and 2011-12. The core question revolved around the legitimacy of the commission expenses claimed by the assessee.2. The facts of the case revealed that the Assessing Officer disallowed commission payments made by the assessee, citing lack of proof regarding the genuineness of the payments. The appellant challenged this decision, contending that the commission expenses were justified. The respondent, the assessee, argued that the commission payments were made to facilitators who assisted in dealings with government departments like PWD and IDA. The respondent maintained that these facilitators were necessary for the business transactions and were not mere commission agents.3. The learned Commissioner of Income Tax (Appeals) considered the past assessments of the assessee and noted that similar commission payments had been allowed in previous years. The Income Tax Appellate Tribunal, relying on a precedent from the Madhya Pradesh High Court, upheld the decision of the Commissioner of Income Tax (Appeals) to allow the commission expenses. The Tribunal highlighted the detailed evidence provided by the assessee, including the names of agents, PAN numbers, transaction details, TDS records, and bank account information, which supported the legitimacy of the commission payments.4. The Tribunal's analysis emphasized that the commission agents were essential for handling specific tasks related to government supplies, such as site visits, measurements, and other services required by government agencies. The Tribunal also referenced a previous judgment by the Madhya Pradesh High Court in a similar case, where commission payments for business purposes were deemed legitimate. Based on the evidence presented and the legal precedents, the Tribunal concluded that the Commissioner of Income Tax (Appeals) was justified in allowing the commission expenses and dismissed the appeals filed by the Department.5. Ultimately, the High Court concurred with the Tribunal's decision, stating that the order passed by the Income Tax Appellate Tribunal was just and proper. The Court found no substantial question of law warranting interference with the Tribunal's ruling. Consequently, the Income Tax Appeals were dismissed, affirming the validity of the commission expenses claimed by the assessee.