TaxTMI 
TaxTMI 
2012 (8) TMI 575
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.... 1 of the appeal of the assessee reads as under : "1. The ld. CIT(A) has erred in law and on facts in confirming action of the Assessing Officer in disallowing amount of Rs. 2,25,931 paid towards employer's contribution to ESI. Under the facts and circumstances of the case, the ld. CIT(A) ought to have allowed the said expense since the liability was incurred, crystallized and paid during the previous year relevant to the year under appeal." During the course of the assessment proceedings it was noticed from the profit and loss account that the assessee has debited Rs. 1,94,554 and Rs. 31,377 against employer's contribution of ESI pertaining to the period from April, 1998 to March, 1999 and April, 2001 to March, 2002 respectively which is not allowable because it pertain to the earlier years and have not been paid before the due date. It was also notice that audit inspection was carried out by the Employees State Insurance Corporation and during the financial year 2004-05 raised objection that the assessee has not paid the above amount before the due date prescribed under ESI law which was violation of the provisions of the Act. The same amount was paid by the assessee on 10-....
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.... the financial year relevant to the assessment year under appeal and objection was raised that the assessee company had not paid employers' contribution of the above amount before the due date prescribed. Demand was accordingly raised though it pertains to the earlier year. The assessee paid the amount in question in the financial year relevant to the assessment year under appeal. These facts would prove that liability to pay the amount under ESI law is crystallized during the year under appeal on raising demand by ESI authorities. Copies of such correspondence are available on record. Even, according to section 43B of the Income-tax Act, deduction shall have to be allowed irrespective of the previous year in which the liability to pay the sum was incurred by the assessee according to method of accounting regularly followed by it, only in computing the income referred to in section 28 of the Income-tax Act of that previous year in which such sum is actually paid by the assessee. According to accounting standard when the liability is crystallized and the amount is paid, deduction shall have to be allowed in favour of the assessee as per the provisions of law and further the claim of....
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....e the assessee has received Rs. 25,17,424 from ECGC as claimed and Rs. 3,59,519 as exchange rate difference. The remaining amount of Rs. 44,44,175 was treated as bad debt. The Assessing Officer noted that efforts made by the assessee for recovery of the dues have not been substantiated. The Assessing Officer called for explanation of the assessee and the assessee explained that the above amount against the aforesaid party has been written off as bad debt in the profit and loss account, the export sales of which were credited to the profit and loss account. Therefore, conditions of the provisions of law have been satisfied. The assessee produced certain material and documents in support of the claim that it was genuine bad debt. The Assessing Officer however, did not accept the contention of the assessee and rejected the claim of the assessee because no specific documentary evidences have been furnished or action initiated for recovery of the amount in question. The amount in question was accordingly disallowed. The learned CIT(A) on the same reasons rejected the claim of the assessee. 8. The learned Counsel for the assessee submitted that it is not in dispute that the amount in ....
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.... expenses incurred to avail his valuable services is nothing but expense incurred wholly and exclusively for the purpose of business that was paid through the official banking channel. Ld. CIT(A) ought to have allowed the commission expense that was incurred for promotion of business." During the course of assessment proceedings it was noticed that the assessee has claimed commission of Rs. 48,42,185 on the total sales of Rs. 12,19,20,962 whereas in the preceding year the assessee has claimed commission of Rs. 9,62,397 on the total sales of Rs. 10,44,50,134 which is 3.97 per cent and 0.92 per cent respectively. Vide questionnaire dated 28-l1-2006 and 5-2-2007 the assessee was asked for to submit the reasons for such disproportionate commission payments against the turnover with supporting evidences. The details in respect of total sales effecting commission payments and rate of commission was also called for. In response to the above, the assessee has submitted vide letter dated 12-4-2007 details of sales commission as under : Sr. No. F.Y. 2004-05 Rate of F.Y. 2004-05 F.Y. 2003-04 Rate of F.Y. 2003-04 Sales Value Commission Commission Amt.....
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....Intermediates Ltd., during F.Y. 2004-05. The same percentage of commission at 4.50 per cent was paid to the same party on sale value of Rs. 1,60,72,491 during F.Y. 2003-04. In this case also, the rate of commission at the rate of 4.50 per cent has remained constant for both the financial years for the same party. (d)As regards export commission of 30 per cent is concerned, the export sales have been effected to <> E. Frapas and Co., Greece. The letter of the overseas buyer dated 16-9-2004 is enclosed where they have requested us to reimburse 30 per cent of the invoice value to meet with their increasing cost of business at their end. These reimbursements of expenses have been given/granted to them by naming it as commission. In fact, the export sale value has obviously been inflated so as to accommodate 30 per cent reimbursement of expenses so that we do not incur loss or reduce our profit in such export transactions. You can appreciate from the letter that these facts have been narrated in the letter of the overseas buyer. The export commission has been paid through authorized dealer i.e., Bank of Baroda. Thus, in terms of revenue, we are not at a loss as the sale rate of our p....
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....sales of Rs. 6,10,010 in preceding year. The commission paid at the rate of 2.25 per cent and 4.50 per cent on the sales effected Rs. 2,36,45,174 and Rs. 73,41,256 respectively to various parties seems to be reasonable after considering the submission of the assessee. As far as commission paid at the rate of 30 per cent to Chrochem E. Frapas and Co., Greece is concerned, it is stated that the assessee himself admitted in its submission that the overseas buyers requested to reimburse 30 per cent of the increased invoice value to meet with their increasing cost of business and these reimbursement of expenses given/granted by the assessee to them have been given the name it as commission. The same was done at the request of the overseas buyer which requires to him to meet the business operating cost such as interest cost, inventory management cost as well as customer entertainment cost etc. In this way, the assessee had paid Rs. 39,81,648 as commission on the sales effected to Rs. 1,33,01,959 at the rate of 30 per cent during the year under consideration. Considering the manner in which the assessee had done the business transactions and quantum of commissions paid are not acceptable ....
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....95) which is also reproduced above and would show that the party has requested the assessee to reimburse 30 per cent of the invoice value to meet with their increasing cost of business at their end. This reimbursement of expenses has been named as commission. In fact, the export sales value has been inflated so as to accommodate 30 per cent of the reimbursement of the expenses in order to avoid loss in the export transaction. The assessee accepted the requirement of the foreign party to add 30 per cent to the price agreed between them and prepared proforma invoices. Letter of the assessee is filed at PB-99. Letter of the foreign buyer is filed at PB-100. Vide PB-101 the assessee quoted the lowest price of the sale of the goods and vide PB-97 proforma invoices were prepared through which the sales value has been inflated in the invoice as against rate of the products offered by the assessee. These facts would show that sale consideration was inflated in the invoices at the instance of the foreign buyer so as to meet out the operating cost of the business. But the name is given as commission. Since the expenses reimbursed were valued by inflating the invoice value, there was nothing ....