TaxTMI 
TaxTMI 
2015 (4) TMI 867
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....red in law and on facts in deleting the addition of Rs. 18,00,00/- made by the AO on account of disallowance of lease rent of DG Set, without properly appreciating the facts of the case and the material brought on record by the AO. 2.2. In doing so, the Ld.CIT(A) has erred in law and on facts in not appreciating that the order of the ld.CIT(A) for Asst.Year 2006-07 has not been accepted by the department and the matter is subjudice before the Hon'ble Tribunal. 3. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 30/12/2009, thereby the Assessing Officer (AO in short) made disallowance of commission payment of Rs. 27,46,569/- and disallowance of rent on DG set of Rs. 18 lacs. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee allowed the expenditure in respect of the commission paid to Smt.Roopam Mardia (Nakoda Enterpris....
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....A) vide order No. CIT(A)-VIII/ITO/4(1)/209/08-09 dtd. 29.9.2009 deleted the addition on identical facts giving the following findings:- "I have considered the facts and the submissions of the Ld. A.R. carefully. There is no dispute about the fact that the appellant has paid commission to the tune of Rs. 24,30,078/- to M/s. Nakoda Enterprise a proprietary of Smt. Roopam Mardia. The A. O. has disallowed the amount holding that Smt. Mardia has not rendered her services directly to the appellant. He has also observed that the contribution of Shri Rajiv Mardia in the business of Smt. Mardia shall not be taken any cognizance of. He has also observed that the other employees of Nakoda Enterprise had played minimum role in its business. He has held that under these circumstances the payment of commission was not wholly and exclusively for the purpose of business. 6.5 The A.O, however, by arriving at this conclusion has not brought on record any evidence to support such findings. On the contrary, it is found that Smt. Roopam Mardia in her statement recorded at the time of survey and subsequently has elaborately discussed her business connections with the appellant and the services ren....
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....istical purposes by restoring the issue back to the file of AO for decision afresh. The facts are identical in this year as well and the ld.CIT(A) has followed the order of his predecessor which has been set aside by the Coordinate Bench. The Coordinate Bench in ITA No.261/Ahd/2010 pertaining to AY 2006-07 has observed as under:- "6..... . In this regard, certain points are required to be established by the assessee who is claiming the genuineness of the commission payment:- (i) That the amount in question has actually been expended. (ii) That the mode of payment and the dates of payment are to be precisely informed. (iii) That the basis of payment whether on daily basis, monthly basis or yearly basis and the calculation of commission on each claimed transaction is to be placed on record. (iv) That whether the payment was made on the basis of credit notes or bills raised by the commission agent or that what was the basis of satisfaction before making of payment. (v) That the Assessee is required to establish that ah agent has been appointed to look after the sales if not personally doing the marketing. (vi) That the assessee is to establish the existence of com....
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....ding position by holding majority shares to influence the business decisions of the assessee-company. Finally when the genuineness could not be conclusively established, then the provisions of section 37 was invoked and rightly so." 5.2. Therefore, this ground of Revenue's appeal is also restored to the file of AO to decide it afresh in the light of the direction given by the Coordinate Bench in ITA No.261/Ahd/2010(supra). Thus, ground Nos.1 & 1.2 of Revenue's appeal are allowed for statistical purposes. 6. Ground Nos.2 & 2.2 are inter-connected. The ld.Sr.DR submitted that the identical issue was also raised for adjudication in the AY 2006- 07, wherein also the Hon'ble Tribunal has restored the ground to AO for decision afresh. This fact is not controverted by ld.counsel for the assessee. 6.1. We find that the ld.CIT(A) had followed the decision of his predecessor passed in AY 2006-07 and decided this issue by holding as under:- "3.3 I have considered the findings of the A.O., submission of the appellant and other materials available on record. Here again, the identical addition was made by the A.O. in the preceding year and the same was deleted by my predecessor Ld CI....
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....ssor Ld. CIT(A) in the previous year on the impugned issue. Therefore, the disallowance made by the A.O. is deleted. AS such the appellant gets relief of Rs. 18 lakhs." 6.2. The issue travelled upto the stage of the ITAT 'C' Bench Ahmedabad and the Tribunal in ITA No.261/Ahd/2010 for AY 2006-07 vide order dated 12/10/2012 was pleased to restore this issue as well to the file of the AO by observing as under:- "8. Ground No.2 reads as under:- The CIT(A) has erred in law and on facts in deleting the disallowance of rent on DG set amounting to Rs. 18,00,000/-. 8.1. The AO has noted and show cause was issued in respect of lease-rent paid to Smt.Roopam at the rate of Rs. 3 lacs per month in respect of the hiring of diesel generator. Facts have revealed that a generator which costed Rs. 96 lacs was rented out by Smt.Roopam to the assessee-company in terms of an agreement dated 25.02.2004. The allegation of the AO was that the generator was taken on lease from the lady with an intention to pass on an undue benefit. The assessee's reply was that the decision of hiring of generator set was a commercial decision of the assessee-company. The lady has invested a huge amount towards....
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.... On one hand, the assessee has informed the Assessing Officer that the profits were going high and the turnover had also gone upto Rs. 66 crores but on the other hand, the assessee-company has not demonstrated that why the generator set was not purchased by the assessee-company of its own having dual benefit, i.e. saving of lease-rent and also the benefit of deduction of depreciation. As far as the 50% disallowance is concerned, the action of the Assessing Officer can be said to be duly covered by the section 37 of the I.T.Act. He was not required to invoke the provisions of section 40A(2) as objected by Id.AR. Section 37 explicitly says that an expenditure has to be wholly for the purpose of the business. IF an expenditure is not wholly for the purpose of the business, but partly for the purpose of the business, then only that part is allowable. The words "wholly and exclusively", thus refer to the motive and the object behind the expenditure. The object has to be exclusively as also solely for running of the business. The expenditure has to be incurred in reality and there shall be ostensible reason for incurring of the expenditure. The Assessing Officer has thought it proper to ....