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2016 (2) TMI 496
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....as passed u/s 147/143(3) of the Income-tax Act by the AO is arbitrary, unjust and illegal on various factual and legal grounds including the following: a) Provisions of section 147/148 of I.T.Act were not applicable to the facts of this case. b) There was no nexus between the reasons recorded and the alleged escapement of income." "2. That the ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 38,35,079/- on account of payment of commission on sales to Iraq by stating that the Appellant has not been able to co-relate the sales of earlier years with such fee. The observation of the ld. CIT(A) are incorrect in as much as complete details of the sales to Iraq and also the ASSF paid in respect thereof were filed not only before the ld. AO during the course of assessment proceedings but were also filed before the CIT(A) during the course of appellate proceedings. The said details have either been ignored or not appreciated by the ld. CIT(A)." 3. Grounds raised by the assessee in ITA No. 407/Del/2010 :- Grounds raised by the assessee for AY 2003-04 read as under :- 1. That the ld. CIT(A) erred in law and in facts in holding....
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.... return filed for AY 2002-03. For AY 2003-04, the assessing officer recorded similarly worded reasons on the aforesaid two issues and besides these issues the AO also raised third issue pertaining to loss on account of foreign exchange amounting to Rs. 16,20,398/-. It is relevant to mention here that in the order passed u/s 147/143(3) of the Act for the both assessment year. No addition has been made in both the years on the basis of reason recorded with regard to issue of foreign exchange transaction and for AY 2003-04 no addition has been made on the issue of loss of account of foreign exchange fluctuations. ASSESSEES GROUND NO. 1 FOR AY 2002-03 AND 2003-04 6. We have heard arguments of both the sides have perused the relevant material placed on record, the ld. Counsel of the assessee pressed into service amended ground no. 1 for AY: 2002-03 and since ld. Departmental representative fairly submitted that she has no objection regarding amended ground no. 1 submitted by the assessee, thus, amended ground no. 1 for AY: 2002-03 as reproduced above is admitted for consideration and adjudication. 7. We have heard the arguments of both the sides and carefully perused the releva....
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....id commission on exports through banking channel, in pursuance to an agreement approved by Government of India and United Nations, the same could not be disallowed the absence of evidence of its illegality. The ld. Counsel strenuously pointed out that the claim of the assessee was squarely covered by the order of Hon'ble High Court of Kolkata in the case of CIT vs. Raj Rani Export (Supra) and in this situation reopening of assessment in the similar said facts and circumstances cannot be held as valid and tenable. 9. The ld. Counsel of the assessee finally submitted that the reasons recorded by the AO for initiation of the reopening of the assessment for both the years and issuance of notice u/s 148 of the Act and order passed u/s 147/143(3) of the Act passed therein are not sustainable as the AO initiated proceedings of reopening of assessment after 4 years for AY 2002-03 without any allegation on record as required by first proviso to section 147 of the Act. The ld. Counsel vehemently pointed out there is no allegation in the reasons recorded by for AY 2002-03 that any income chargeable to tax has escaped the assessment by reason of the failure on the part of the assessee to di....
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....ry of four years from the end of the relevant assessment year92, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure^92 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts92 necessary for his assessment, for that assessment year:" 12. On bare reading of first proviso to section 147 to the Act it is ample clear that the first proviso is applicable only to the cases were assessment has been made u/s 143(3) of the Act and in the present case, admittedly and undisputedly returns for both the years under consideration were processed u/s 143(1) of the Act and hence, we can safely presume that there was no opportunity for the AO to form any opinion regarding details filed by the assessee in its return of income and other documents filed alongwith return of income and on the and thus we are considered view that the assessee is not eligible for the shelter of first proviso to section1 47 of the Act. At this juncture, it is necessary and relevant to consider the ratio laid down by Hon'ble....
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....O to consider only the profit element for the purpose of computing the adjusted profit u/s 80HHC." 15. Revenue's ground in ITA no. 544/Del/2010 :- "1. Ld. Commissioner of Income Tax (Appeal) erred, in law and on the facts and circumstances of the case, in deleting the addition to Rs. 40,52,998/- made by the AO on account of commission on sale. 2. Ld. Commissioner of Income Tax(Appeal) erred, in law and on the facts and circumstances of the case, in directing the AO to consider only the profit element for the purpose of computing the adjusted profit u/s 80HHC." Ground no. 2 of the assessee and ground 1 of the revenue for AY 2002-03. 16. The assessing officer made addition of Rs. 97,48,138/- on account of disallowance made dismissing the claim of the assessee regarding payment of commission on sale. During first appellate proceedings, the CIT(A) granted part relief to the assessee and upheld part disallowance of Rs. 38,35,079/-. Therefore, in ground no. 1 , revenue is challenging first appellate order which granted part of the relief to the assessee and the assessee in ground no. 2 has challenged the upholding of part disallowance made by the CIT(A), ....
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.... in (2012) 22 taxman.com 13 (Kolkata) where on the similar facts and circumstances the coordinate ITAT Kolkata bench has held that the payments having been made by the assessee for bona fide business purpose which ended up being used illegal kick backs between alia - Iraqi regime over which the assessee had no control, the same could not be disallowed by the revenue. The ld. Counsel also pointed out that the said tribunal order has been confirmed by Hon'ble Kolkata High Court by judgment dated 24.04.2013 since reported in 361 ITR 152. 19. Replying to the above, the ld. DR supported the action of the AO and submitted that the assessee has paid commission to the foreign agents as has been reflected in the bank statement submitted by the assessee but the AO noted that the identity of the agents to whom this commission has been paid remained unverifiable, therefore, the entire commission payment to Iraq was rightly disallowed in absence of satisfactory documentary evidences. The ld. DR vehemently pointed out the assessee had paid commission to other foreign agents and the names of the payees were provided but the identity of the agents to whom commission has been claimed to be paid ....
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....USD 796152/- entered into the Economic and Finance Department, Ministry of Oil, Republic Baghdad after approvals of Government of India and Reserve Bank of India. The ld. Counsel vehemently pointed out that the CIT(A) in the impugned order in para 23 wrongly noted that the appellant has claimed that no sales have been made to Iraq during the year as per affidavit of the Managing Director which is factually incorrect because as per affidavit of Mr. Dhawan placed at page 76 of the assessee's paper book for AY 2002-03 it is ample clear that Mr. V.K. Dhawan stated therein about the Export of Oil Drilling Equipments to Iraq during financial year ended on 31.03.2002 relevant to AY 2002-03. The ld. Counsel reiterating its submission before the authorities below and placing reliance on the decision of ITAT, Kolkata in the case of Rajrani export (Supra) which has been upheld by Hon'ble Kolkata High Court, submitted that the CIT(A) was not justified in upholding the disallowance pertaining to the claim of assessee regarding payment on account of ASSF relating to the payments connected with the said supplies made to Iraq during the relevant period. 22. On careful consideration of above sub....
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....ssion was upheld by the CIT(A). The relevant part of the impugned order wherein the CIT(A) noted the document placed before the AO, before the CIT(A) as well as before this tribunal in this regard and adjudication on the acceptability of the affidavit of Shri Dhawan, Managing Director of the assessee company is being reproduced below : "In support of their claim, the Appellant places reliance on following documents filed before the Id. AO as statedly also duly acknowledged by her in the impugned order: a) Assessee's letter dated 17.7.2008 filed before the Id. AO - copy placed at pages 33-35. b) Assessee's letter dated 6.11.2008 filed before the Id. AO - copy placed at pages 36-40 c) Copy of the purchase order from the Economic and Finance Department, Ministry of OH, Baghdad, Republic of Iraq which also reflects that the ultimate user shall be Iraq Drilling Company. - copy placed at pages 41-60 d) Approval of United Nations UNIES, under whose aegis the supplies to Iraq were made - copy placed at pages 54. e) Copy of ledger account of M O Oil in the books of the Appellant - copy placed at pages 61-62 . f) Copy of ....
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....ty of the statements made in the affidavit and if the deponent has also not been subjected to cross examination for bringing out the falsity of his statements then the tribunal will not be justified in doubting the correctness of the statement made by the deponent in the affidavit. The finding arrived at in such a case would, according to the Supreme Court, be a finding based on pure surmise. 24. Furthermore, from the Ld. CIT(A) order we observe that the assessee submitted detailed submissions and contention supporting the claim of payment of commission and ASSF amount during the relevant period, during the first appellate proceedings which reads as follows :- i) Firstly it is to be submitted that the Appellant nowhere stated that the commissions were paid to the Government of Iraq as has been wrongly presumed by the Id. AO. The commissions are never paid to the end customer but are paid to the agents and facilitators. What is paid to the customer is in accounting parlance called discounts/rebates. So the Id. AO's argument that the contract with the customer i.e. Government of Iraq does not provide for payment of commission is misplaced and erroneous and has no bear....
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....s have indeed been made through banking channels to various parties. None of the parties are stated to be related to the Appellant or any of it's Directors. The payment of commission is claimed to be in accordance with the normally accepted business practices. The payment of commission is claimed to be at arms length price at prevailing market rates. It is stated that the Id. AO has neither disputed nor controverted any of these facts. Hence her allegation that no services have been rendered is not only baseless and erroneous as per the appellant but also grossly against the facts on record. The appellant has stated that (i) It has been so held in Ritz Hotel (Mysore) Ltd. v CIT (1992) 196ITR 614 (Kar.)that the burden is quite heavy On the revenue to establish that no services were rendered and the payment of commission was unauthorized or not warranted by any business considerations. Otherwise the commission payment made by the assessee was to be allowed. ii) The jurisdictional Delhi Tribunal in Ensons vITO 23 Taxman 41 has held that where the burden to establish that the selling agent was "benami" of the assessee firm was not discharged by the revenue, commis....
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....law shall not be deemed to be incurred for the purpose of business or profession and no deduction shall be made in respect of such expenditure." It has been contended that the payment of commission and ASSF were not barred by any law whatsoever nor did the Appellant commit any offence in making such payments. It is also contended that there is no allegation to this effect by the Id. AO while disallowing the expenditure on commissions. Hence it is statedly impliedly accepted by the Id. AO that the expenditure is for the purpose of business of the Appellant. It is stated that Foreign commission (ASSF) paid was incurred wholly and exclusively for the business of the appellant although as per the AO no convincing evidence has been filed in this regard by the appellant. Further it was also stated that it was incurred on account of commercial expediency. Thus it statedly complies effectively with both the preconditions laid down in section 37(1) of Income tax Act 1961making it eligible for full admissibility of the business expenditure as deduction. It is an accepted fact that commissions have been paid by the Appellant to the agents for sales to Iraq and also to various other agents for....
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.... of US$ 79,812 (converted into INR 3,835,079) on account of ASSF dealt with by us in para 1 supra. The balance of Rs. 59,13,059 being commissions to foreign agents has been disallowed by the Id. AO only on the ground that the identity of the agents is not know. The appellant's relevant submission is reproduced below: Furthermore, on the basis of the examination of assessment record, we are to make a categorical statement before Your Honour that the Id. AO never queried the Appellant during the course of the proceedings with regards to the commissions paid to agents for foreign sales other than the ASSF of US$ 79,812 on account of sales made to Iraqi client which were subject matter of re-opening of assessment u/s 147. Hence the addition of balance amount being commissions paid to all foreign agents was made behind the back of the Appellant and without giving them any opportunity to furnish the details and explanations. The Id. AO's remarks that the identity of the agents to whom such commissions have been paid remains unverifiable is factually incorrect in so far as the Appellant was not accorded any opportunity to provide the same. This is in gro....
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....ngs stating the names, addresses and the details of bills also against which such commission was paid. These details are available at page 24 and 25 of the Paper Book and the appellant has certified that no such document has been included in the paper book which was not filed before the AO. Hence, it is held that the lack of opportunity argument of the appellant deserves to be rejected." 17.Having held so, now the issue is whether the payment of commissions and ASSF by the Appellant have been recorded in the appellant's books of account. Also whether the payments were made for the purpose of business and also whether any service was provided by the recipients to the appellant, as discussed by the AO in the assessment order. At the time of re-opening the AO was to examine the fact that the transactions involving sales to the Government of Iraq and the payment of ASSF in respect to said transactions were legal payments or not. The said fact was apparently examined on the basis of the AO's consideration of the purchase order, UN approval, the extracts of books of the Appellant, ledger account of Ministry of Oil, Ledger account of foreign agents, copies of confirmations fr....
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..... 38,35,079/- on account of ASSF relating to payments connected with supplies made to Iraq, is upheld as the appellant has not been able to correlate the sales of earlier years with such fees as it is seen that the appellant has claimed that no sales have been made to Iraq during the year as per the affidavit of the Managing Director. The disallowance of Rs. 38,35,079/- is upheld and the balance of Rs. 54,13,059/- is deleted." 27. In view of the above first issue for adjudication before us is that whether the CIT(A) was not correct in granting part relief to the assessee in regard to deleting the addition made by the AO of disallowance of Rs. 59,13,059/- being expenditure debited under the head of commission ? From the operative part of the first appellate order as reproduced hereinabove. We note that the assessee submitted before the authorities below that the expenditure on payment of commission to agents etc. is deductable u/s 37 of the Act. As per explanation to section 37(1) of the Act the only condition when such expenditure is not allowable is that the expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law shall not be deeme....
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.... & 2001-02 and also during the subsequent assessment years from 2007-08 to 2011-12 in the assessment order passed u/s 143(3) of the Act. Thus, we are considered opinion that , however, the principle of res judicata does not apply to the tax proceedings but rule of consistency is always respect by the revenue authorities unless sufficient reason and dissimilarity in the facts and circumstances exist before the revenue authorities to take a deviate or different view on the issue. 29. During the appellate proceedings, after analyzing the entire facts, it was held that the commission payment made by the assessee is allowable expenses as the same was incurred during the normal course of business over the year. As we have already observed earlier that the payment of commission was made by the assessee to its agent for affecting export sales to various countries and ensuring smooth after sale services for the sole equipment and the assessee placed entire details pertaining to commission paid during the assessment proceedings stating the names, addresses and the details of bills against which impugned commission was paid. In this situation, we are unable to see any valid reason to inter....
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.... made to Iraq by observing that the assessee has not been able to corelate the sales of early arrears with such fees as it is seen that the assessee has claimed that no sales have been made to Iraq during the year as per affidavit of the Managing Director. 33. In our considered view above noted conclusion of the CIT(A) in para 23 of the impugned order are actually incorrect because in the affidavit showed on 22.12.2008 Shri V.K.Dhawan Managing Director of the assessee company stated as follows :- "1. That during the financial year ended on 31.03.2002 (AY 2002-03) the company has exported the Oil Drilling equipment for USD 796152(Equivalent to 549345) to EFD (Economic & Finance Department ) Ministry of Oil, Baghdad, Republic of Iraq after Govt. and RBI approvals. 2. That during the said financial year amount of 54935 was paid towards the after sale services charges to A1 Waseel and Babel General Trading in account of Ministry of Oil Iraqi Drilling Co. This was paid through wire transfer from our account with Punbaj National Bank, Dehradun." 34. In view of the above, besides other documentary evidence filed before the AO during the assessment proceedings and a....
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....noted the proposition laid down by Hon'ble Supreme Court in the case of Mehta Parikh & Co. v. CIT 30 ITR 181 (SC) , wherein their lordship speaking for the apex court of India held that if there is no material whatsoever on record for doubting the veracity of the statements made in the affidavit and if the deponent has also not been subjected to cross examination for bringing out the falsity of his statements then the tribunal will not be justified in doubting the correctness of the statement made by the deponent in the affidavit filed before the revenue authorities. 37. In view of above, we have no hesitation to hold that the CIT(A) uphold the part disallowance on account of ASSF relating to payments connected with supplies made to Iraq on the basis of incorrect observations appreciation of facts and on the very wrong and perverse premise which is not sustainable and acceptable. 38. At the juncture, it would be relevant to take cognizance of the decision of Hon'ble Kolkata High Court in the case of CIT v. Rajrani Exports Pvt. Ltd. (Supra) wherein it was held that where assessee has paid commission on exports through banking channels in pursuant to agreements approved by Gove....
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....rave;-vis the local costs, even if that be so, that aspect of the matter does not affect the deductibility in the hands of the assessee either. The assessee is concerned with commercial expediency of the said payment and not with what are the actual costs incurred in rendering the services for which the payment is made. As we have seen earlier in this order, from the extracts of the Volker Committee report itself, it was absolutely necessary for the assessee to make the impugned payments and, in any event, the commercial expediency of these payments has not even been called into question by the Assessing Officer. The case of the revenue is confined to invoking the Explanation to Section 37(1). The objections to the said commission payments are, therefore, not sustainable in law, so far as deductibility under section 39(1) is concerned." 6. The department has come up in appeal. Mrs. Smita Das De, learned advocate appearing in support of the appeal, could not satisfy us as to why were the findings indicated above as recorded by the CIT(A) and the Tribunal incorrect either on fact or in law. There is, as such, no reason why the appeal should be entertained. The appea....
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....tions 706 (1991) and 712 (1991), adopted, respectively, in August and September 1991. Resolution 986: On 14 April 1995, acting under Chapter VII of the United Nations Charter, the Security Council adopted resolution 986, establishing the "oil-for-food" programme, providing Iraq with another opportunity to sell oil to finance the purchase of humanitarian goods, and various mandated United Nations activities concerning Iraq. The programme, as established by the Security Council, is intended to be a "temporary measure to provide for the humanitarian needs of the Iraqi people, until the fulfillment by Iraq of the relevant Security Council resolutions, including notably resolution 687 (1991) of 3 April 1991". Agreement: Although established in April 1995, the implementation of the programme started only in December 1996, after the signing of the Memorandum of Understanding (MOU) between the United Nations and the Government of Iraq on 20 May 1996 (S/1996/356). The first Iraqi oil under the Oil-for-Food Programme was exported in December 1996 and the first shipments of food arrived in March 1997. Funding: Until 20 March 2003, when war intervened and oil exports under the programme ended,....
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....NDP, WFP, UNOPS, UN-Habitat. Delivery: As of 28 May 2003, some $28 billion worth of humanitarian supplies and equipment had been delivered to Iraq under the Oil-for-Food Programme, including $1.6 billion worth of oil industry spare parts and equipment. An additional $10 billion worth of supplies were in the production and delivery pipeline. Performance: The latest report of the Secretary-General on the Oil-for-Food Programme was issued on 12 November 2002 (S/2002/1239). It focuses on improvements, shortcomings and difficulties in the humanitarian situation in Iraq; a revenue shortfall in the programme; and an assessment of the implementation of the new set of procedures for the processing and review of contracts for humanitarian supplies. The new procedures were introduced under Security Council resolution 1409 (2002), based on the Goods Review List (GRL). It is the first such assessment since the adoption of that resolution. Oil-for-Food Plus: The Programme, as outlined in the latest report of the Secretary-General, was expanded by the Security Council beyond its initial emphasis on food and medicines to include infrastructure rehabilitation and 24 sectors: food, foodhandling, hea....
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....r Iraq held by the Central Bank; and provided for the termination of the Oil-for-Food Programme within six months, transferring responsibility for the administration of any remaining Programme activities to 'the Authority' representing the occupying powers. The Council has called on the United Nations to assist the Iraqi people, in coordination with 'the Authority', in a wide range of areas, including humanitarian relief, reconstruction, infrastructure rehabilitation, legal and judicial reforms, human rights and the return of refugees, and also to assist with civilian police. In its "phasedown" prior to closure on 21 November 2003, the Office of the Iraq Programme, in coordination with UN agencies and programmes, the Coalition Provisional Authority (CPA) and Iraqi authorities, has continued to identify and ship approved and funded priority items in a pipeline of humanitarian goods and supplies valued at some $10 billion. As of 4 November 2003, consultations between the Coalition Provisional Authority, Iraqi experts and the United Nations, had resulted in the prioritization of 3,168 contracts valued at more than $8.5 billion. (Updated 4 November 2003) (Emphasis by underlining suppli....
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....whether the accounts of the Programme were in order and were maintained in accordance with the relevant Financial Regulations and Rules of the United Nations */7. There were many significant and controversial findings in this report. One very important aspect of this report was about 'non-contractual beneficiaries' of oil allocation by Iraqi regime, and these allocations or quotas granted by the Iraqi regime were perceived as de facto bribe payments by the Iraq regime. That aspect, however, does not touch the issue in appeal before us. There were also findings to the effect that Iraqi regime used several front companies, which entered into agreements with the exporters and collected amounts for 'after sales service', 'inland transportation fees', 'commission' etc, and the amounts so collected by these front companies were passed on as kickbacks to Iraqi regime. This is the area which concerns the issue in this appeal before us, as the disallowance before us pertains to the commission payment by the assessee , in the form of 'inland transportation fees' and 'after sales service', to a company by the name of Alia Transportation and General Trading Co. Interestingly, this com....
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....me or Security Council resolutions. By arranging for suppliers to make illicit payments to a Jordanian company such as Alia-instead of directly to ISCWT or another governmental entity of Iraq-the Iraqi regime disguised the illicit nature of such payments. 498 In fact, all transportation services for which Alia received payment from humanitarian suppliers were provided by employees of the Government of Iraq. Transport of goods arriving at Umm Qasr was provided by trucks from the Ministry of Transportation or the Iraqi Grain Board ("IGB"). When asked how much of the fees paid by Alia to ISCWT were used for the true costs of transport, Alia's general manager stated: "There were no actual costs. The driver got maybe $10. This was a payment to the Government of Iraq." Alia's general manager was unaware whether the actual costs for transport had any bearing on the transportation fee charged and collected by Alia. Following the conclusion of contract negotiations between an Iraqi purchasing body and a supplier, ISCWT contacted Alia by fax, letter, or telephone and informed Alia of the amount that was to be received from the supplier. On some occasions, ISCWT contacted th....
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....l of $1,246,072 in after-sales-service fees (in cash and in kind) and $90,900 in inland transportation fees, totaling $1,336,972. With respect to one of these contracts, COMM no. 800929, Alia disputed the characterization of its payment as an "after-sales-service" fee, referring to the payment merely as an "extra fee." Additionally, Alia advised that it inflated the price of this contract by more than $4,000 per vehicle at the Government of Iraq's request and then used the extra revenue to purchase fifty more vehicles that it shipped without inspection to Iraq. 503 In summary, based on the available evidence, Alia knowingly acted as a front company, serving as a conduit for collecting hundreds of millions of dollars in illicit fees paid by suppliers to the Iraqi regime. Alia further made illicit payments totaling $1,336,972 in connection with its own contracts under the Programme." 8. There is thus reasonable material, by way of Volker Committee report, to indicate that no services were actually rendered by Alia which actually worked as a conduit for Iraqi regime on a wafer thin margin of 0.25% to 1.00%. The balance amount, ranging from 99% to 99.75% of the amount....
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....f Rajrani Exports (Supra) finally granted relief to the assessee dismissing appeal of the revenue with following conclusion :- "11. As a matter of fact, this Volker Committee report goes on to acknowledge the fact that while many companies freely went along with Iraq's demand for kickbacks, many companies ignored the probable use of these payments, there were also the companies which were not aware about the end use of these payments and made these payments unwittingly. There were thus three categories of persons who paid the kickbacks (a) first, the persons who were all along aware that the payments as after sales service fee and inland transportation fees are in the nature of kickbacks and they were thus willing parties to these illegal gratifications; (b) second, the persons who had suspicion that the amounts paid as after sales service fees and inland transportation fees to may be used as kickbacks but they ignored these doubts; and (c) third, the persons who paid the amounts as after sales service fees and inland transportation fees under the bonafide belief that these payments are being made for the stated purposes. In our humble understanding, so far as category (a)....
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....his proposition: In fact, all transportation services for which Alia received payment from humanitarian suppliers were provided by employees of the Government of Iraq. Transport of goods arriving at Umm Qasr was provided by trucks from the Ministry of Transportation or the Iraqi Grain Board ("IGB"). (Page 304 of the report) Vessels berthing at Umm Qasr required the approval of the Iraqi State Company for Water Transport ("ISCWT") before being permitted to discharge. ISCWT was one of over a dozen SOEs overseen by the Ministry of Transportation and Communication ("Ministry of Transportation"). Under Iraqi law, ISCWT had exclusive authority for all activity at Iraqi ports. Its official function was to arrange and authorize the unloading of cargo and to act as a marine agent for ships carrying procured goods. In addition, it represented to the United Nations that it coordinated transport to internal warehouses and informed Iraqi end-users of inbound goods. However, ISCWT employees did not themselves actually participate in the discharge and handling of cargoes. The Iraqi State Company for Ports, another SOE within the Ministry of Transportation, assumed that ....
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....tions to the said commission payments donot, therefore, are not therefore sustainable in law, so far as deductibility under section 37(1) is concerned. 18. A lot of emphasis has been placed by the CIT(A) on this Tribunal's decision in the case of TIL Ltd (supra). However, as we have decided the matter on merits and on the first principles, we see no need to deal with the said judicial precedent. Our reasoning could be different than the reasoning adopted by the CIT(A) and that adopted by the coordinate bench in TIL's case (supra), but then our conclusion is the same as arrived by the CIT(A) and by the coordinate bench. It is this aspect of the matter which is material for the present purposes. 19. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 20. As we part with the matter, we must make it clear that our references to the Volker Committee report were only with a view to analyse as to whether even if everything stated in the Volker Committee report is taken as correct and this report is taken as an admissible evidence, will the dedu....
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....r of the CIT(A) we observe that the CIT(A) granted part relief of the assessee regarding commission paid for affecting export sales to various countries. However, the CIT(A) uphold part disallowance and addition on account of ASSF by observing that the assessee has not been able to co-relate the sales of earlier years which such fees as it is seem that the assessee has claimed that no sales have been made to Iraq during the year as per affidavit of the Managing Director. As we have already observed and discussed above the CIT(A) dismiss the claim of the assessee on wrong promise and by making factually incorrect and perverse observations as in the affidavit of Shri V.K.Dhawan, Managing Director available at assessee's paper book page no. 76, as reproduced above, on behalf of the assessee it has been stated that during the financial year relevant to AY 2002-03 the company has Exported Oil Drilling Equipment to Economic and Finance Department, Ministry of Oil, Bagdad, Republic of Iraq after Government of India and Reserve Bank of India approvals and the impugned amount of commission was paid towards ASSF to AL Wasel & Babel General Company in the account of Ministry of Oil, Iraq Dril....
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....agents and copy of the affidavit of Shri V.K.Dhawan, Managing director of the assessee company as discussed have been placed by the assessee before the authorities below as well as before this tribunal in assessee's paper book at pages 41-76 and lower authorities have not doubted these documents in any manner. 45. In this situation, the allegation of the AO cannot be held as sustainable that the identity of the recipients, service rendered by them is not verifiable. At the cost of repetition, we may again point out that assessing officer has not made any allegation against the assessee that the payment of ASSF in question was made by the assessee voluntarily in the nature of kick backs and the assessee was willing party to make these payments in the garb of ASSF as illegal gratifications. On the basis of foregoing discussion, we reach the logical conclusion that the assessing officer ignore vital evidence filed by the assessee and wrongly rejected the documentary evidence and explanation of the assessee and the CIT(A) dismissed claim of the assessee on factually incorrect, perverse and unjustified reasoning and thus we are inclined to hold that the assesse's claim on account of ....
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....such payment was passed on by Iraqi Company as kick back or illegal gratification to Iraqi authorities or any other entity or person. In the present case, there is no such allegation of the revenue, therefore, the present assessee before us has a better case and does nothit by explanation to section 37(i) if the Act. Finally, we are inclined to hold that the payment of ASSF made by the assessee during the relevant financial period towards export of oil drilling equipments etc. does not fall in the first category payments as per Volker Committee report and thus the same is allowable business expenditure and therefore, we direct the AO to allow the same. Accordingly, ground no. 2 of the assessee in AY 2002-03 is allowed. Ground no. 2 of the assessee for AY 2003-04 48. We have heard argument of both the sides and carefully perused the relevant material placed on record, the ld. Counsel of the assessee pointed out that ground no. 2 of the assesee for AY 2003-04 is similar to the ground no. 2 of the assessee for AY 2004-05 (ITA no. 408.Del.2010). Ld Counsel further pointed out that ground no. 2 for AY 2003-04 may be decided in accordance with the ground no. 2 of the assessee for A....
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.... Supreme Court in the case of M/s Topman Export vs. CIT, Mumbai reported as (2012) 342 ITR 49 (SC) and submitted that the entire sale proceeds of the DEPB realized on the transfer of DEPB is not to be considered for the purpose of computing the adjusted profit u/s 80HHC of the Act but only the difference between the sale value and the face value of DEPB represent profit on transfer of DEPB. 53. On carefully consideration on above submission of both the sides at the very outset we note that the issue of adjustment of profit on account of sale of DEPB is not as Hon'ble Apex Court in the case of M/s Topman Export v. CIT had explicitely held that the difference between the sole value and the Face Value of DEPB represent profit on transfer of DEPB and required adjustment in this regard for computing profit u/s 80HHC of the Act should be made on the basis of difference only. The relevant operative part of M/s Topman Export v. CIT, in the para 12, 13 and 14 of this decision is being respectfully reproduced as follows :- 12. It will be clear from the aforesaid provisions of Section 28 that under clause (iiib) cash assistance (by whatever name called) received or receivable by a....