TaxTMI 
TaxTMI 
2014 (9) TMI 498
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....ect of the involvement of any third party in the sales of chemical to the assessee company by the Assessing Officer vide its letter 05.02.2003 from M/s Auchtel Products Ltd. Mumbai the said company vide its reply dated 17/02/2003 has informed that (A) the company has made sales to them during financial year 2000-01 (B) copy of account of the above party is enclosed (C) there is no agreement in writing with the above party (D) the goods are supplied directly to the above party (E) bills are raised on the above party (F) payments are received from the above party. 3. That the order of the Ld. Commissioner of Income Tax(A), Kanpur being erroneous in law and on facts deserves to be vacated and the order of the Assessing Officer be restored." 3. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of learned CIT (A). 4. We have considered the rival submissions. We find that this issue was decided by CIT(A) as per Para 5.4 to 5.4.1 of his order, which are reproduced below for the sake of ready reference: "5.4 I have gone through the finding given by the assessment order in the assessment order and also the observatio....
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....el Products Ltd. are produced as under: Copy of letter dt. 02/05/2011 The Principal Officer M/s. Anchfel Product Ltd. 142/C, Victor House N.M. Joshi Marg Lower Parei (W) Mumbai-400013 Sir, Sub:- Notice u/s 150/153 of the I.T. Act 1961 Reg- On perusal of the case records of M/s. Shalini Chemicals Pvt. Ltd., Jajmau, Kanpur for Asstt Year 2001-2002, I find that it has credited the account of Asian Chemicals Products Company, Worli Mumbai-25 with a sum of Rs. 1141105/- on account of commission paid/payable by them to above concern for purchases made by Shalini Chemicals Pvt. Ltd. from your company. From records, it is also seen that M/s. Asian Chemicals Products Company is closely associated with your company; with two of the partners namely Shri Rajiv Tandon and Smt. Deepa Tandon being the director of your company. As per the bank details (Bank of Baroda, Worli Branch), the address of Asian Chemicals Product Company is your registered office address and the introducer of that accounts is also your company. The authorized person of M/s. Asian Chemicals Product Company is/was Shri V.N. Athalye who is/was, V.P. of your company. Further, Shri V.N. Athalye in ....
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.... by the appellate authority should a/so necessary for the disposal of the appeal before it. In the present case, there does not appear to be a necessity to give a finding that this income belonged to one or the other party. Issue is whether this is allowable as expenditure to the appellant or not. Without prejudice to our submission above, we wish to submit further that besides Shalini Chemicals Pvt. Ltd. is just one of our several customers who also purchase the same chemicals from us as Shalini Chemicals Pvt. Ltd. did. We have charged the same price from other customers also which we have charged from Shalini Chemicals Pvt. Ltd. As we know, M/s. Asian Chemicals Products Company is an independent and a separate entity of its own with which Shalini Chemicals Pvt. Ltd. had an agreement under which it paid/credited certain amount as commission to it Just because M/s. Asian Chemicals Products company happened to have some directors of our company as its partners and that their bank account was introduced by the company, it does not mean that an income which belonged to them would become our income. Upon receipt of your letter/notice we contacted M/s. Asian Chemicals Products ....
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....ugned payment of Rs. 11,41,105/- made by the appellant company is an allowable deduction. The appellant gets relief of Rs. 11,41,105/-." 4.1 From the above paras from the order of CIT(A), we find that he has examined the issue in great detail. In fact, he has made enquiry from the suppliers as well as the party to whom commission was paid by the assessee in respect of purchases. Thereafter, he has given a finding that the assessee's business was mainly dependent on the supply of goods from Auchtel Products Ltd. and therefore, the assessee had to pay the said amount of commission on such purchases. He has also noted that the assessee had agreed with the terms and conditions of the company and to compulsorily part with certain amount by way of commission to the sister concern of the supplier company which in the opinion of the CIT(A) was nothing but part of the sale consideration payable by the assessee company to the supplier company. These findings of facts of CIT(A) could not be controverted by Learned D.R. of the Revenue and hence, on this aspect, we find no reason to interfere in the order of CIT(A). Hence, we decline to interfere in his order on this issue. 5. In the ....
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....rt rendered in the case of J.K. Woollen Manufacturers vs. CIT [1969] 72 ITR 612 (SC) 8. As against this, Learned D.R. of the Revenue supported the orders of the authorities below. 9. We have considered the rival submissions. First of all, we reproduce the details of sales and commission paid by the assessee in the present year as available on page No. 40 of the paper book which is as under: S.No. Name of the party Amount(Rs) 1. Alig Industries 1,87,934.41 2. Abdulla Tannery 5,58,255.00 3. Allig International 14,33,070.00 4. Alig Tannery 8,13,415.00 5. Bharat Tanning Industries 28,16,131.45 6. Leather Age Tannery 1,18,162.00 7. Leather Age Nepal 12,870.00 8. N.C. & S. India 8,46,074.48 9. Rusk International 4,65,340.00 10. Rehman Exp[orts 49,059.20 11. Seema Tanning Ind. 2,86,615.00 12. Super Tannery India Ltd. 2,68,002.00 13. Super House Leather Ltd. Goat 22,04,653.62 14. Super House Leather Ltd Goat 2,32,385.00 1,07,33,967.19 Commission @ 10% 10,72,720.00 9.1 We also reproduce the details submitted by Learned A.R. of the assessee for the present year as well as....
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.... 10,72,720/-. As per the details of party-wise sales in the present year as well as preceding two years, we find that in most of the cases, sales was effected in assessment year 1999-2000 also to the same parties but no commission was paid in that year to M/s Klassic Enterprises Prop. Subash Bhagat. Hence it cannot be said that these parties were introduced by Sri Subhash Bhagat for the first time in the present year or in assessment year 2000-2001 when commission was paid by the assessee to him. When the assessee company was effecting sales to these customers in assessment year 1999-2000 also, when no commission was paid to M/s Klassic Enterprises Prop. Subash Bhagat, it cannot be said that these parties were introduced by this commission agent to the assessee and hence, there is force in the allegation of the Assessing Officer that the assessee's claim regarding payment of commission to this person is a bogus claim. When the assessee is effecting sales to this party in assessment year 1999-2000 without paying any commission to M/s Klassic Enterprises Prop. Subash Bhagat, it cannot be accepted that in subsequent years, there is necessity to pay commission. Admittedly, few part....
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....urt was as to whether commission payment to sole agent in respect of controlled sugar was allowable expenditure or not. Under these facts, it was held by Hon'ble Allahabad High Court that since the validity of the agreement of 01/10/98 was not in dispute and the agreement remained in force at all material times under clause 12 of the agreement, the agent was entitled to receive commission even through much of the sugar was dispatched to dealers nominated by the Government, commission was payable to the agents because the agreement remained in force and therefore, this expenditure is allowable. In the present case, the facts are different because this is not the case of the assessee before us that commission was paid compulsorily under an agreement inspite of this fact that supplies were made to dealers nominated by the Government. In the present case, a commission agreement was entered into by the assessee company on 1st April, 2000, copy of which is available on page No. 38 and 39 of the paper book but we have seen that commission was paid to this person in respect of sales to those parties also to whom sales were effected by the assessee in assessment year 1999-2000 and 2000-....
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....use of this reason that the assessee was already making sales to most of the parties, we do not find any reason to interfere in the order passed by learned CIT (A) on this issue. Accordingly this issue is decided against the assessee. 9.6 Regarding the disallowance out of remuneration paid to directors of Rs. 2 lac, Learned A.R. of the assessee placed reliance on the judgment of Hon'ble Apex Court rendered in the case of S. A. Builders Ltd. Vs Commissioner of Income-tax (Appeals) [2007] 288 ITR 1 (SC). He also placed reliance on a judgment of Hon'ble Calcutta High Court rendered in the case of Commissioner of Income-tax Vs Edward Keventer (Pvt.) Ltd. [1972] 86 ITR 370 (Cal). He also placed reliance on the Tribunal decision in the case of Dy CIT vs. Maya Producta (P) Ltd. in I.T.A. No.33/Lkw/2012 dated 27/05/2014. He submitted copy of the order. Learned DR of the revenue supported the orders of the authorities below. 10. We have considered the rival submissions. We find that in the present case, total payment of Rs. 4.5 lac was made to three directors of the assessee company out of which the Assessing Officer made disallowance of Rs. 2 lac. With regard to the payment o....