Business deduction for commission payments supported by evidence and actual services rendered in government supply contracts

Commission paid for actual services rendered in connection with government procurement and supply execution was allowable as a business deduction when supported by PAN details, vouchers, account confirmations and applicable TDS compliance. The record showed that the agents carried out identifiable pre-tender, tender and post-supply work, and the adverse finding that no middlemen could be involved in government supplies was not borne out by the evidence. The appellate authority accepted the genuineness and business necessity of the payment, so the disallowance was deleted and the Revenue's challenge failed.

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Issues: Whether the commission expenditure claimed for services rendered in connection with government supply orders was allowable as a business deduction.

Analysis: The expenditure was supported by PAN details of the recipients, vouchers, account confirmations, and TDS compliance where applicable. The material on record showed that the agents performed identifiable pre-tender, tender, and post-supply services connected with procurement and execution of government supply orders. The finding of the Assessing Officer that no middlemen could be involved in government supplies was not supported by the factual record. The disallowance was made without effective rebuttal of the evidence produced by the assessee, whereas the appellate authority recorded detailed factual findings accepting the genuineness and business necessity of the commission payment.

Conclusion: The commission expenditure was held to be a genuine business expense and the disallowance was rightly deleted; the Revenue's challenge failed.

Ratio Decidendi: Commission paid for actual services rendered in connection with business procurement and execution, when supported by evidence and not shown to be illegal or sham, is allowable as a business expenditure.

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