TaxTMI 
TaxTMI 
2014 (4) TMI 698
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.... (Appeals) erred in law and on facts in upholding the action of the Assessing Officer in disallowing the commission of Rs. 3,88,623 on sales. 2. Facts in brief:- The assessee company is engaged in the business of manufacturing of hand gloves and safety industrial products. It is mainly exporting goods outside India and getting its products in domestic markets. The Assessing Officer noted that the assessee has claimed expenditure on account of commission of Rs. 3,88,623, on some of the local sales. The assessee, in response to the show cause notice, submitted that it had agreed to pay commission to M/s. Accent Industries Ltd. (ASL) on sales made to two parties which were introduced by them. The Assessing Officer observed that the assessee c....
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....in such price charged to the buyers referred by the ACL has been treated as commission. In this year, such a difference of price was on account of billing done by the assessee company to two parties viz. Bajaj Auto Ltd. and ACB International Ltd., who were introduced by ACL. The working of commission to ACL and the rate at which the products were sold to ACL was furnished before the learned Commissioner (Appeals). It was further submitted that the assessee's turnover for the relevant assessment year was Rs. 10,20,62,373 and the commission paid to ACL on sales is only 0.33%, which is not much looking to the entire turnover. The learned Commissioner (Appeals), however, did not accept the assessee's contention and held that no justification ha....
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....yers, which has been treated as commission. This was the reason that only on selective sale, commission has been charged. Insofar as the reasoning of the learned Commissioner (Appeals) that there is no agreement, the learned counsel submitted that the nature of transactions which was undertaken was in the ordinary course of business and looking to the difficulty of the assessee that it did not had any proper infrastructure to sell its products in India, it has engaged services of ACL as business necessity and expediency. He also referred to the decision of the Hon'ble Supreme Court in S.A. Builders Ltd. v/s CIT, [2007] 288 ITR 001 (SC). He further pointed out that similar commission was paid in the assessment year 2005-06 also, wherein ....
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....mmission payment to ACL has been that it had an understanding with ACL that for the purpose of domestic sales, it will sell its product to ACL directly at a pre-determined price. On such sales, there is no payment of commission. It is only when the buyers insist upon manufacturer's bill, then the assessee raises the bill on the buyers directly at a price negotiated by the ACL. The difference between the bill amount and the pre-determined price with the ACL has been treated as commission. This incidence of payment of commission is only with regard to sales made to Bajaj Auto Industries Ltd. and ASB International Ltd. only. From the chart submitted, it is seen that the assessee has made direct sale to ACL at Rs. 44,20,960 and sale to Bajaj Au....
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....ifference amount of pre-determined price as agreed with the ACL and the amount received by way of sale from these parties have been treated as commission, which is nothing but price difference. The statement of working of commission as was filed before the learned Commissioner (Appeals) clearly shows the pre-determined rate of sale of ACL and the rate of sale made to the two parties. From the records, it is seen that the assessee has also made direct sales to other parties on which no commissions have been paid and only in few instances, commission has been paid to others. Thus, the payment of commission is not germane in assessee's business. 7. It is further seen from the records that in the earlier years also, the assessee had paid simil....