TaxTMI 
TaxTMI 
2013 (10) TMI 703
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.... of the case, in brief are: The assessee is engaged in the business of import and sale of modular kitchen & appliances. During the course of assessment proceedings it was found that assessee had declared total sales of Rs. 7,85,44,927/- on which it had incurred commission expenses of Rs. 29,50,904/-. Assessing officer asked for justification in this behalf. It was replied that the assessee had paid sales commission for booking of orders for modular kitchen to various customers. Debit notes showing the details were filed. The assessing officer found that the commission of Rs. 29,50,904/- paid to one K.S. Singhal Dairies Pvt. Ltd. ("KSSD") worked out @ 22% of the gross sale executed. Assessing officer vide questionnaire dated 19-11- 2010 asked the assessee - (i) The commission to KSSD has been shown to be incurred for the first time, whether requisite TDS was deducted on this commission and if so, form no. 16A may be submitted. (ii) Why these expenses have not been debited to P&L A/c under the head commission and have been reduced from the sales. 2.1. The assessee replied : (i) Requisite TDS was deducted and ledger account and form no. 16A copies were enclosed. (ii) Co....
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....ge to meet out the expense of personal nature and further some of the expenses are also not supported by bills/ vouchers. Therefore to cover up element of personal expenses and expenses of un-verifiable nature, a disallowance of Rs. 1,50,000/- is made. This will mean an addition of Rs. 1,50,000/-." 2.7. Aggrieved, assessee preferred first appeal where the CIT(A) confirmed both the additions by following observations: Commission income: "4.1. In the present case, as stated earlier, the appellant company has not been able to give any credible evidence which could prove that any services were rendered either by M/s K.S. Singhal Diaries (P) Ltd. or its directors in so far as the sales of assessee's products are concerned. The MOU dated 02-04-207 and the debit notes issued by M/s K.S. Singhal Dairies (P) Ltd. have to be seen in the background that he said company was having accumulated huge losses and could have accommodated the appellant company in saving the taxable income. 4.2. In view of the aforesaid, I do not find any substance in the claim of the appellant company and the disallowance made by the AO on account of payment of commission of Rs. 2950904/- to M/s K.S. Sing....
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....% of the gross value of billing to the customers introduced by the Agent. The Principal shall forward a copy of invoice to the Agent for his records and for his billing for sales commission simultaneously." 3.3. Thus, the rate of commission is fixed by the MOU which is duly executed and binding on the assessee. It is pleaded that payment of commission to an Agent who has rendered services is an allowable deduction. The assessee has discharged its burden by identifying the KSSD which has confirmed the receipt of the income and which is recorded in the books of account. The concerned copy of ledger has been produced. 3.4. Apropos foreign traveling ld. Counsel for the assessee contends that the foreign tours of the directors of the assessee firm has not been doubted. Only because some details could not be produced, an ad hoc disallowance has been made out of the foreign exchange purchased by the assessee. It is pleaded that when the foreign travelling itself has been held for business purpose, there is no justification in making ad hoc disallowance out of the foreign traveling. 4. Ld. DR, on the other hand, referred to the MOU itself and contends that various clauses of MOU p....
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....d Agent were supposed to maintain copious records for the transactions of trade inquiries, sales and realization of sale proceeds by cash or cheques. . The record of modular kitchen specifications, length, breadth, width and other requirement of the customers all are essential for this type of business. Nothing worthwhile in this behalf has been supplied by assessee or agent except figure of commission paid, TDS and income-tax record. The assessee has only pointed out about the identity of KSSD and its being an income tax assessee. a crucial fact which is being glossed over by the assessee is the record of business services. It was a mutually beneficial dubious arrangement for both i.e. to reduce assessee's profits and thus avoid tax and for KSSD to reduce its loss. The production of skeleton record about identity as mentioned above does not prove that any business services were rendered by KSSD and enjoyed by the assessee for its business. No customer details about inquiry, requirement, size of their kitchen & model of kitchen by prospective visitors has been filed, similarly any proof about feed back, after sale service nothing has been rendered. 4.2. Apropos subsequent years ....
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....ss. At the same time various stipulations of MOU prescribed that the assessee and agent will keep various type of record, send it to assessee, who in turn will process it, send the invoices to recipient who will collect the money paid to assessee. Thus a full fledged exercise was to be carried out by the assessee and its agent as per MOU for rendering the services and earning the commission. No record or evidence what-so-ever has been produced to this effect. 5.2. Thus the assessee has utterly failed to demonstrate the nature, extent of service rendered by the agent and availed by the assessee for its business of modular kitchens. In this scenario what appears on record is merely book entries coupled with TDS the amount which will be claimed as a refund by the recipient being a loss making concern. In our considered view the assessee has produced only skeletal paper work of the arrangement without any iota of evidence about actual business services rendered. 5.3. The assessee's claim for allowing similar commission payment in subsequent year caries no merit inasmuch as ld. DR has rightly pleaded that each and every year of assessment is separate and independent unit and princ....