TaxTMI 
TaxTMI 
2012 (1) TMI 250
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....at the assessee company engaged in the business as one of the largest cargo movers having more than 800 branches spread throughout the country. In the course of its transport business, assessee claimed to have made commission payments by way of incentive to various employees, representatives and agents of its customers, whose cargo was carried from one place to another through its largest fleet of surface transport carriers. These commission payments were made as an inducement for bringing transportation business to the assessee in preference to other transport carriers, besides to secure early payment of its bills for transportation and amicable settlement of the claims, which sometimes arise in the normal course of business on account of incidental and unavoidable delays and damages suffered to the cargo in the course of loading, unloading and transportation form one place to another. 4. While for the assessment years 2001-02 and 2002-03, the assessing officer disallowed 15% of the amounts of commission claimed of Rs. 5,15,28,011 and Rs. 5,21,16,149, which worked out to Rs. 77,29,201 and Rs. 78,17,422 respectively, on a total turnover of Rs. 451,50,78,301 and Rs. 468,09,42,289....
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....n from one place to another, appears to be self-serving statement and is not supported by the evidence. Such a stand is not acceptable. f. Moreover, payment commission by the assessee company is opposed to public policy, as held by the Hon'ble Andhra Pradesh High Court in CIT V/s. Kodandarama & Co.( 144 ITR 395). g. The decision of the jurisdictional High Court in assessee's own case for assessment years 1981-82 to 1984-85, reported in 256 ITR 701 is against the assessee company. It was held therein in no uncertain terms that it is the duty of the assessee to prove the genuineness of payments. The assessee company failed to discharge its onus and prove the identity of the payees, as well as prove the genuineness of payments, since the payment vouchers did not contain the addresses of the payees. The decision of the Hon'ble High Court has also reached finality with the dismissal of SLP. h. The fact that during the last several years, the department has accepted the claim of the assessee, is held irrelevant. There is no res judicata in assessment proceedings. i. The fact that the assessee company is unable to furnish the addresses of the recipients or produce suc....
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.... case, the vouchers of the assessee are accompanied with copies of relevant consignment notes giving full details about the consignment, the names and addresses of the consigners/consignees, the place of issue/booking, destination of the cargo and freight charges, the date of payment and the amount of commission paid and the names of the payees. The vouchers also contain the acknowledgements in respect of the receipt of commission by the concerned payee. In these circumstances, it cannot be said that the debit voucher read with the consignment note annexed thereto, is no good evidence in respect of payment of commission by the assessee company. The only missing link is the address of the payee. It has been explained that if the full identity of the agents/employees of the customers to whom such commission payments are made, is disclosed it would greatly jeopardize the business interests of the assessee company. Moreover, since the payments are made in very small amounts to large number of persons, the details as to the addresses of the payees are not maintained. The assessee company maintained vouchers in every case commission payment with the signature of the payee, and the assess....
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....t. Elaborating the factual position in this behalf, he submitted that even though in the case of Patel Roadways Ltd., in their audited printed financial accounts, exact amount of commission payment has not been disclosed, the fact of payment of commission by the said company is admitted inasmuch as the freight is disclosed in the audited accounts net of commission payments, which clearly indicates that the company is admittedly paying commission, and if necessary, the assessing officer could have verified the quantum of commission paid by that company by reference to the assessment records of that company already available with the department. As for ABC India Ltd, the data furnished were in respect of two financial years corresponding to assessment years 2000-01 and 2001-02 and the data for the other years could have been obtained by the assessing officer himself with reference to the ast records of that company. The data furnished by the assessee for the two years clearly prove that the said company also used to pay commission and the range of payment of commission by that company was 1.23% in assessment year 2000-01 and 1.57% in assessment year 2001-02. As against this, taking u....
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....nies. He submitted that the assessee has to pay commission to keep the employees of the consignor company in good humour by way of inducement for bringing/granting transport business to the assessee company and for various other incidental purposes, and the lower authorities were not justified in brushing aside this plea of the assessee as a self-serving statement, since it is a well established and recognized practice in the assessee's line of business, viz. transportation business. 12. The learned counsel for the assessee submitted that the decisions of the Hon'ble High Court in assessee's own cases for earlier years, as well as in the case of Kodandarama & Co. (supra) are clearly distinguishable. Elaborating this point ad dealing with the decision of the jurisdictional High Court in the case of Kodandarama & Co (supra) learned counsel submitted that in that case before the High Court, the assessee has made contributions to the Andhra Pradesh Welfare Fund, as he was told that he would not get the export permits unless he made the contributions. The Tribunal thereupon found that contribution to the Welfare Fund was a pre-condition for grant of export permits and as ....
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....he branch manager of Jaipur Branch to the effect that he did not make any payment of commission to the employees of the contracting parties, after he joined the Jaipur Branch. Reference to the statement of the Jaipur Branch Manager, in the aforesaid judgment, appears to have been made inadvertently because of the fact that the statement of Jaipur Branch Manager has already been rejected by the Inspecting Assistant Commissioner of Income-tax, in the course of proceedings in respect of that very year under S.144B of the Act. Shri Dukhi Pandey, the Regional Manager of Varanasi Branch, under whom, the new Manager of Jaipur Branch, Shri V.N.Upadhyay had all along been working at Varanasi, had filed an affidavit before the IAC in the course of the proceedings under S.144B of the Act to the effect that Shri Upadhyay was mainly looking after the operation of vehicles at Varanasi Branch, and was therefore, not concerned and/or aware with commercial matter, regarding payment of a commission which was made thorough Shri L.B.Roy, a senior employee of the Varanasi branch under his (Shri Pandey's) supervision and directions. The statement made by the Regional Manager of the Varanasi Branch i....
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....th bringing out the points of distinction in this behalf. 15. Learned counsel for the assessee submitted that though large number of affidavits have been filed by the assessee during the assessment proceedings for the assessment years under appeal, as stated above, the same were arbitrarily and incorrectly rejected by the assessing officer merely on the ground that they are merely self-serving statements, which have no evidentiary value and could not be treated as proper evidence, unless the contents thereof were based on proven facts. He submitted by the very nature, every affidavit is a self-serving statement, but have the evidentiary value as recognized and emphasized by the Courts in several cases. He vehemently disputed this stand of the lower authorities in brushing aside the evidentiary value of the affidavits by taking us through the provisions of S.3(3) of the General Clauses Act, 1897 and Rule 1 of Order 19 of the Civil Procedure Code, 1908 and placed strong reliance on the following decisions- (a) Mehta Parikh & Co. V/s. CIT (30 ITR 180)-SC (b) Union of India & Anr. V/s. Delhi High Corut Bar Association & Ors.(2002) 4 SCC 275(....
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.... CIT V/s. Printers House Pvt. Ltd. (23010)188 Taxman 70(Del) The learned counsel for the assessee took us through the voluminous paper- books which inter-alia contained all the affidavits in relation to the entirety of commission payments made by it in each of the relevant years under appeal,. And photocopies of some of the receipted vouchers by way of sample in each of the relevant years. It is submitted that the tax authorities have not pointed out any specific defect whatsoever in any of the vouchers evidencing payment of commission made by the assessee company in any of the years under appeal, but made sweeping remarks in general drawing adverse inferences, as discussed above, against the assessee. 17. Referring to the assessment order dated 31.3.2004 passed by the assessing officer for the assessment year 2001-02 under S.143(3), learned counsel for the assessee submitted that the observations of the assessing officer that from the vouchers of commission payments produced by the assessee company and examined by him, it was found that in certain cases commission was paid in the range of 11% to 32.84% of the freight amounts noted in the accompanying consignment ....
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....this context that the assessee paid minimum level commission for securing the transport business and the commission paid is not at all disproportionate to the freight received in respect of the relevant consignments as noted in the accompanying notes; and there was never an occasion whatsoever when single payment of commission as made in respect of several consignments booked form different clientele. 19. The learned Departmental Representative on the other hand, strongly supported the orders of the assessing officer for the years under M/s. Transport Corporation of India Ltd., Sec'bad appeal, and submitted that no part of the commission payment claimed by the assessee for any of the years under appeal, is allowable. Even otherwise, he submitted that the assessee did not produce all the vouchers evidencing commission payments in respect of each of the relevant years and that the vouchers maintained by the assessee in respect of commission payment are self-made and contain several suspicious features and do not infuse confidence as to the genuineness of these commission payments in question, which are all along made in cash. In this behalf, he submitted that addresses of the ....
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....red to the cargo in the course of loading, unloading and transportation from one place to another, on the ground that it is only a self-serving statement and is not supported by any evidence and such a stand is not acceptable. He also pleaded that payment commission by the assessee company is opposed to public policy, as held by the Hon'ble Andhra Pradesh High Court in CIT V/s. Kodandarama & Co.( 144 ITR 395). He also relied on the decision of the jurisdictional High Court in assessee's own case for assessment years 1981-82 to 1984-85, reported in 256 ITR 701 is against the assessee company and emphasized that it was held therein in no uncertain terms that it is the duty of the assessee to prove the genuineness of payments. The assessee company failed to discharge its onus and prove the identity of the payees, as well as prove the genuineness of payments, since the payment vouchers did not contain the addresses of the payees. The decision of the Hon'ble High Court has also reached finality with the dismissal of SLP. In this connection, he did not find merit in the points of distinction brought out by the learned counsel for the assessee for the years under consideration....
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.... Manager etc., which were filed by the assessee company for the first time in relation to the assessment year 2001-02, before the CIT(A), and the CIT(A) admitted those affidavits as evidence without giving any opportunity to the assessing officer in terms of Rule 46A. 22. He strongly relied on the decisions of the jurisdictional High Court in the case of Kodandarama & Co. (supra) and in assessee's own case(256 ITR 701) for the assessment years 1981-82 to 1984-85 and disputed the points of distinction brought forth by the learned counsel for the assessee and submitted, in any event, that they are not valid or good enough to ignore the binding decision of the jurisdictional High Court on this very issue and in assessee's own case. On the admissibility of deduction in respect of commission payments, the learned Departmental Representative also placed reliance on the decision s of Gujarat High Court in CIT V/s. Navsari Cotton and Silk Mills Ltd. (135 ITR 546) and of the Bombay high court in CIT Vs. Taraporvala Sons Co. Pvt. Ltd. (239 ITR 319). 23. The learned counsel for the assessee, in his reply, disputed the contention of the Learned Departmental Representative that th....
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....proceedings under S.132 of the Act, when huge amount of cash was seized from the possession of the assessee. It was taking note of the contradictory statements in the statement under S.132(4) and the affidavit filed in the course of assessment proceedings, in the light of the facts and circumstances of the case before it, the Jaipur Bench of the Tribunal held that although as a general rule, if the deposition made in the affidavits is not tested through cross-examination, the same should be accepted, but before accepting any deposition contained in an affidavit, it was always necessary that the deposition should inspire confidence, and that the same should appeal to the reasons of a prudent man. In the circumstances, while there can be no quarrel with regard to the proposition laid down by the Jaipur Bench of the Tribunal in that case, considering peculiar facts and circumstances of that case which did not inspire confidence in the affidavit filed in that case and therefore the decision went against the assessee therein, the decision of the said case has no application to the facts of the present case. He also distinguished the other case law relied upon by the Learned Departmental....
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.... The following words of Lord Denning in the matter of applying precedents have become locus classicus: Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it. 6. Since the factual position has not been analyzed in detail, disposal of appeals by mere reference to decisions, was not the proper way to deal with the appeals. The GEGAT also does not appeal to have dealt with the relevance and applicability of ITC's case (supra), on which strong reliance has been placed by learned Solicitor General." It is....
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....ribunal had not addressed itself to the relevant questions properly to see whether the necessary conditions existed or not to allow deduction under section 37(1) and whether the assessee had discharged the burden cast on it. Therefore, the findings given by the Tribunal were perverse and based on irrelevant considerations." 28. As seen from the above judgement it is observed that there is no quarrel with regard to the proposition that it is for the assessee to discharge whether any expenditure should be incurred in the course of his business or trade and such expenditure may be incurred voluntarily and without any necessity and such expenditure is incurred, even voluntarily for promoting the business interest and to earn profit, the assessee is entitled to claim deduction under sub section (1) of 37, though there is no compelling necessity to incur such expenditure. It is also observed that payment itself not established and, secondly it is not the case of the assessee before the assessing authority that the particulars of the persons to whom the amounts of secret commission were made could be supplied without detriment to the business of the assessee having regard to the nature....
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....ation fund. Similarly, Section 33AC deals with reserves for shipping business. Section 33B relates to rehabilitation allowance and Section 34 deals with conditions for depreciation allowance and development rebate. Section 34A deals with restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies. Section 35 deals with expenditure on scientific research. Section 35A deals with expenditure on acquisition of patent right or copy right. Section 35Ab deals with expenditure on know-how. Section 35ABB deals with expenditure for obtaining licence to operate telecommunication services. Section 35AC deals with expenditure on eligible project or scheme. Section 35AD deals with deduction in respect of expenditure on specified business. Section 35B deals with export market development allowance. Section 35C deals with agricultural development allowance. Section 35CC deals with rural development allowance. Section 35CCA deals with expenditure by way of payment to association and institutions for carrying out rural development programmes. Section 35CCB deals with expenditure by way of payment to associations and institutions....
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.... the jurisdictional High Court in the assessee's own case for earlier years. The vouchers were not signed by the recipient. It does not contain any details regarding the recipient or payments made. Moreover, the Assessing Officer examined the manager of Jaipur Branch of the assessee who stated that after he took over as manager of the Jaipur Branch no payment of 'secret commission' was made. For the year under consideration, the vouchers produced by the assessee are signed by the recipient. They are not the vouchers signed by the employees of the assessee. The assessee has furnished the affidavit from the regional managers to show that the commission was in fact paid to the employees or agents or representatives of the private companies, who book the consignments. We have gone through the relevant portion of the assessment order for the assessment year 1981-82 which was placed on record at page no. 280-281 of the assessee Paper Book, volume-II filed in relation to ITA No. 430/Hyd/07 for the assessment year 2000-01. For the assessment year 1981-82 in a proceedings u/s 144B of the Income-tax Act, 1961, the Inspecting Assistant Commissioner of Income tax (IAC) rejected the....
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....f secret commission paid from year to year. The percentage of secret commission was minimal. The full details of payment on the above basis in respect of several parties were available. They were correlated to the transactions which the assessee had with those persons and the period during which the transactions were entered into. The only missing item was stated to be the names of the particular parties to whom the payments were made. This, the Tribunal held, could not be supplied without detriment to the business of the assessee in the very nature of things. Shri Patel then pointed out that, in paragraph 29 of the judgment, the Special Bench of the Tribunal noted that the position was the same in the case of Indochem Ltd. and that of the assessee. On the above stated facts, our judgment in the case of CIT v. Goodlass Nerolac Paints Ltd. [1991] 188 ITR 1 (Income-tax Reference No. 606 of 1976) dated August 21, 1990, squarely applies. Accordingly, we agree with the Tribunal that its conclusion is based on a finding of fact arrived at on the basis of good and cogent material" 35. In the instant case of the assessee-company too, the facts are identical with those considered by t....
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.... and as such, the lower authorities cannot reject the affidavits filed by the assessee outright, without examining the deponents thereof in relation to the contents of such affidavits. In this case, admittedly, the deponents of the affidavits were not examined by the lower authorities. The affidavits of regional managers were filed in addition to vouchers and the copies of consignment notes. In our view, these pieces of evidence cannot be brushed aside to disallow the commission payments. We have carefully gone through the judgement of supreme court in the case of Mehta Parikh & Co vs. CIT (30 ITR 180)-SC, wherein it was held that if the departmental authorities do not consider it necessary to call for the deponents in order to cross examining them, with reference to the statements made by them in their respective affidavits, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits. 38. Further, S. 3(3) of the General Clauses Act, 1897 defines an Affidavit to include an affirmation and declaration in the case of persons by law allowed to affirm or declare instead of swearing. The essential ....
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....ior officers of the assessee, merely on the ground that these were self serving declarations/documents, particularly when neither the assessing officer nor the CIT(A) called any of the deponents for cross examination, in course of the impugned assessment/appellate proceedings, for any of the years now under appeal. As correctly canvassed by the ld counsel for the assessee, every affidavit is a self serving declaration on oath made by the deponent thereof, and on that ground alone the affidavit cannot be rejected and/or ignored. 41. Though the learned Senior Departmental Representative appearing for the Revenue before the Tribunal referred to the decision of Jaipur Bench of the Tribunal in Kanhaiya Lal Doshi v. Asst. Commissioner (1996) 56 TTJ 207 (Trib-Jaipur) in support of his submissions that the affidavits, in all cases, the same cannot be accepted as good evidence for income tax proceedings. In that case, the evidence of the assessee, who was subjected to search and seizure proceedings under section 132 of the said Act had been recorded under section 132(4). In his statement under section 132(4), the assessee had accepted his ownership of the cash found and seized from his p....
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....n the affidavits have no evidentiary value. 42. Similarly, though the learned Senior Departmental Representative also relied upon the decision of the Allahabad High Court in Sri Krishna v. CIT (1983) 142 ITR 618 (All) - copy appearing at pages 616-622 of the Compilation of Case decisions, Volume-V, in support of his submissions that the Affidavit need not always be accepted as correct, that decision of the Hon'ble Allahabad High Court is clearly distinguishable, on facts, as discussed by their Lordships at pages 623 of the Reports (142 ITR). Their Lordships noted that ordinarily, in absence of denial, the statements made in an Affidavit, in all cases, may be accepted as true, unless there are circumstances going to suggest that the statements on Affidavit should not be accepted as true. In that case, the assessee after 15 years, had asserted on Affidavit for the first time that notices of demand were not served on him. The court noted that the plea of alleged non service of notices of demand was never taken by the assessee earlier; and that he made this assertion after a long delay of 15 years, when he became sure that the income tax records proving the service of notices we....
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....essment Year 1982-83, the other dated 10.09.85 passed in respect of the Assessment Year 1983-84, and yet another dated 27.03.86 passed in respect of the Assessment Year 1984-85. Even in paragraph 1.24 of the assessment order passed in respect of the Assessment Year 1982-83, the Assessing Officer had himself recorded that in course of hearing before the CIT (Appeals), for which year also a similar disallowance for commission payment was made, it was contended that commission paid was in the nature of secret commission and that it would be against the interest of the assessee to reveal the identities of the recipients of the commission. Copies of the relevant portions of the assessment orders for the said three years appear at pages 282-286 of the Paper Book, Volume - II filed in relation to ITA No. 430/Hyd/07 in respect of the assessment year 2000-01. 46. It however appears that the attention of their Lordships of the Hon'ble High Court of Andhra Pradesh was inadvertently not drawn to the aforesaid contentions of the Assessee Company, as recorded by the assessing officer himself in the respective impugned assessment orders; and the High Court distinguished the case of the ass....
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....d established trade practice in the transport business; and that without such payment, it was not possible to survive in this line of business, as well as the prevalent trade practice in the line of business carried on by the Assessee Company all along. 49. We also be noticed that in the four years, considered by the Hon'ble Jurisdictional High Court, the total commission was never disallowed. The amount of commission disallowed in those four years ranged from 9.45% to 11.98% of the aggregate freight received by the Assessee Company in each of the relevant years. 50. In view of the facts and circumstances discussed hereinabove the decision of the Hon'ble Andhra Pradesh High Court in Assessee Company's own case in respect of the Assessment Years 1981-82 to 1984-85 (supra), is clearly distinguishable on facts, and cannot support the stand of the revenue that the entire payment of commission claimed by the assessee company as a deductible business expenditure should be disallowed in each of the 5 years now under appeal. 51. We are also supported in this behalf by the following decisions, relied upon by the learned counsel for the assessee, wherein identical facts ....
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.... respects, including quick payment of bills. The Tribunal also found that the assessee was maintaining proper accounts and records regarding these payments in that the payments were made under the instructions and directions of the top executives of the company and were approved by the board of directors at the end of every month. According to the Tribunal, the facts that the assessee was a public limited company, that the accounts were not merely audited but were also placed before the general body of the shareholders, that the assessee's turnover was increasing year after year and that such payments claimed as deduction had dropped from 1.34% for one of the years to 0.22% in the year in question, were very relevant. On the basis of these and other evidence, the Tribunal concluded that the fact of payment of commission was established even though the names and addresses of the recipient were not given and that the payments were made for the purpose of business. As observed by our High Court in the assessee's own case for the earlier year, it was perfectly open to the Tribunal to accept or not to accept the assessee's claim for payment. It was for the Tribunal to dec....
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....that it was a practice prevailing in the trade of dye-stuffs and colour chemicals which are being sold to the textile mills to pay secret commission. This aspect is also considered by this court in the case of Moolchand Jaikishandas and Co. [1977] 108 ITR 500. Considering the aforesaid facts and the established trade practice, it cannot be said that the finding given by the Tribunal of upholding partial disallowance can be interfered with by this court. In this view of the matter, as all these questions referred to this court are based upon a finding of fact, they are required to be answered accordingly. " 55. In CIT v. A.S.K. Rathinasamy Nadar (1995) 212 ITR 527 (Mad), their Lordships of the Hon'ble Madras High Court held and observed at pages 529, 531 & 532 of the Reports inter alia as under: "It is seen from the orders of the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal and the statement of the case submitted to this court that the Income-tax Officer examined the vouchers given in support of the payment of brokerage in connection with the transaction with Ashok Leyland Limited and to others. He, however, disallowed the commission on the gro....
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....s of the case of the assessee. One of the settled principles of law is that the High Court while answering any question shall not record its own findings on issues of facts. It can, undoubtedly, see whether there is any invalid material taken into consideration by the Tribunal or whether any valid material has been omitted and not taken into consideration. The High Court cannot, however, go into the facts first to decide any issue of fact which is opposite to the opinion and come to a finding opposite to that of the Tribunal and then hold that the Tribunal has committed an error of law. Learned counsel for the assessee has drawn our attention to a Bench decision of the Bombay High Court in the case of Goodlass Nerolac Paints Ltd. v. CIT [1982) 137 ITR 58, which has taken notice of the trade practice of secret commission paid to the customers and others and found no error in granting deduction of such expenditure under section 37 of the Act. To conclude, we hold that the Tribunal had full materials to support its conclusion and it has committed no error of law. The reference is answered accordingly ....." 56. In CIT v. Mills Stores Trading Co. India Pvt. Ltd. (1984) 18 Taxman 85 ....
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....the findings of the Tribunal, which we have referred to above, have been arrived at without any evidence. As pointed out by a Division Bench of this Court in Goodlass Nerolac Paints Ltd. v. CIT [1982] 137 ITR 58 the Court observed: " ..... It was for the Tribunal to decide, as the final judge of facts, as to whether the case of the assessee that these amounts were actually paid by way of secret commission, should be believed or not, in the absence of the names and addresses of the persons to whom secret commissions were alleged to have been paid " (p.62) 4. In that case, on the facts the Tribunal had disbelieved the case of the assessee regarding payments of such amounts as secret commission and we declined to interfere with that finding for the reasons stated above. In the present case, the Tribunal has believed that case of the assessee that the payments were made as well as that there was nexus between the said payment and the business of the assessee and we do not see how these findings of fact can be interfered with in a reference. " 57. The same view was reiterated by the Hon'ble Bombay High Court in CIT v. Hoechst Dyes & Chemicals Ltd. (1984) 17 Taxman 389 (Bom)....
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....s also no evidence to show that the amount of commission came back to the assessee in any form. Since the assessee has given full details including the addresses of buyers and addresses of the agents, as well as details of payment etc. the transactions of payment of commission as well as the aspect of rendering services by the commission agents were fully verifiable. However, neither the Assessing Officer nor the learned CIT (Appeals) made any attempt at their end to make probe into the matter for coming to the conclusion that the transactions were bogus, unfair and fraudulent. In our opinion, in absence of any such material on record and in absence of any inquiry conducted to prove the non-genuineness of the transactions the departmental authorities were not justified in disallowing the claim of the assessee which was fully supported by the documentary evidence on record." 61. Further, in paragraph 7 of his impugned assessment order dated 31st March, 2004 passed by the Assessing Officer, in the instant case of the assessee company, for the assessment year 2001-02 under section 143(3) of the said Act, the Assessing Officer had observed hat from the vouchers of commission payment....
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....encing commission payments in respect of each of the relevant years. The learned counsel for the assessee as noted above has countered this observation made on behalf of the revenue as wholly incorrect. It is the contention of the assessee company that there are more than fifty lakh vouchers evidencing commission payments in the relevant years now under appeal before the learned Tribunal. In course of the assessment proceedings, the assessee company had taken before the Assessing Officer all its books of accounts along with the relevant vouchers and documents through truck loads. The Assessing Officer however examined some of the vouchers by way of sample, at his own option, by pick and choose method. All the vouchers were again produced before the learned CIT(A), who also examined the vouchers by way of sample, at his own option, by pick and choose method. 64. In the circumstances mentioned hereinabove, while the assessee company filed all affidavits in relation to the entirety of commission payments made by it in each of the relevant years under appeal, in the Paper Books filed before this Tribunal, the assessee M/s. Transport Corporation of India Ltd., Sec'bad company gav....
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....cision submitted that the assessee company satisfied each of the positive tests laid down in the said judgment; and its case is not covered by any of the negative tests laid down by the Hon'ble Gujarat High Court therein. 68. In CIT v. Taraporvala Sons Co. Pvt. Ltd. (1999) 239 ITR 319 (Bom) - copy appearing at pages 634-637 of the Compilation of Case Decisions, Volume - V, their Lordships of the Hon'ble Bombay High Court found that the tax authorities had not examined the issue whether the case of that assessee was covered by the new Explanation inserted under section 37(1) of the said Act with retrospective effect 01.04.1962. In that view of the matter, the Hon'ble High Court had remanded the matter to the Tribunal with a direction to examine the issue in the light of the said Explanation. 69. In the case of the assessee company herein, that aspect had already been examined by the tax authorities below. The case of the assessee company herein has, all along, been that the payment of commission, in the instant case, to the employees / representatives and agents of the private sector enterprises, on whose behalf the cargo was carried by the assessee company to diff....
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....nd will accordingly apply in relation to assessment year 1962-63 and subsequent year. 73. The intention of above explanation is to disallow the expenditure incurred by the assessee for any purpose which is an offence or prohibited by law. Therefore, we have to examine whether the payment of commission to the employees/ agents/ representatives of the private companies for booking the consignments is an offence or is prohibited by any law. 74. As discussed earlier, judgement of jurisdictional High court in the case of CIT Vs Kodandarama & Co ( 144 ITR 395) has no application to the facts of present case. In that case, assessee, a dealer in paddy, rice etc; claimed the payment made to Andhra Pradesh Welfare Fund as business expenditure u/s 37(1) of the act. Assessee claimed that unless the said payment to the welfare fund was made, no permit for export of rice to the State of Kerala would be issued by District collector. However, the assessing officer disallowed the payment on the ground that the said expenditure was not incurred wholly and exclusively for the purpose of business. The High court found that for the purpose of granting permission to export of rice to Kerala the co....
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....ng all the necessary particulars and the consignment note. The copy of consignment note is enclosed with each voucher. In our opinion, the payment for the year under consideration has been established by the assessee by producing the voucher signed by the recipient, consignment note and affidavit of 79 Regional managers before lower authorities. Therefore, as rightly observed by jurisdictional High court is burden of proof has been discharged by the assessee by producing audited books of accounts, payment vouchers and other documents giving full details as to the nature of transactions which necessitated the payment of such commission, including the affidavits sworn by the Regional/ Zonal/Divisional/ Area/ Controlling managers, operational heads viz. Vice presidents and Senior Executives etc., declaring, inter alia, on oath that the commission payments were actually and factually made by the assessee by way of incentives to the employees/ agents/ representatives of customers who brought in cargo to the assessee company for booking; and that this was an accepted norm and established trade practice in the transport business; and that without such payment, it was not possible to survi....
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....er of the CIT to invoke provisions of section 263 when same issue subject matter of appeal filed this assessee before CIT(A). On the other hand for assessment year 2001-2002 both the assessee and revenue is in appeal before us and challenged the genuineness of payment of commission and which shall be required to adjudicated by us. 79. Now, we have to examine whether the payment of commission is reasonable or it is excessive compared to nature of business. The assessee filed a statement showing the factual background in regard to the freight receipt, the commission paid by the assessee company, percentage paid with reference to the freight receipts, the amount disallowed by the lower authorities and the amount of disallowance sustained by the Tribunal in the respective years: A.Y. Freight income (Rs.) Commission paid (Rs.) % of commission on freight Disallowed by AO (Rs.) Sustained by CIT(A) (Rs.) Sustained by ITAT (Rs.) 1976-77 123835249 123835249 0.87 15000 8000 7000 1977-78 130256082 1457766 1.12 25000 12000 10000 1978-79 144952475 2116115 1.46 35000 18000 10000 1979-80 177786531 27266....
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....7 9.45 81. It is to be noted that High court has confirmed the disallowance for the assessment years 1981-2, 1982-83,1983-84 and 1984-85 at the rate of 10.84%, 11.98%, 10.76% and 9.45% of freight receipts respectively for these years. 82. Now, out of the five years now under appeal before us, the assessing officer had disallowed 15% of the aggregate commission paid by the assessee company in the assessment year 2001-02. The learned CIT(A) has sustained disallowance to the extent of 5% of the aggregate commission paid in that year. Both the Department as also the assessee are in appeal on this issue before us. For this assessment year 2001-02, there is reassessment proceedings through which there is allowance of 100% commission payment against which the assessee in appeal before us on reopening and also challenging the 100% disallowance of commission payment. 83. For the assessment years 2000-01 and 2003-04, the Assessing Officer had disallowed 100% of the commission payment. The CIT(A) had sustained the disallowance of commission at 20%. Both the assessee as well as Department is in appeal before us. 84. For the assessment year 2002-03, the Assessing Officer had disa....
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....sed the amount of commission separately. It is stated in the Notes on Accounts (para 2 C ii) that the freight income is after deduction of booking commission. ii. Profit before tax of Associated Road Carriers Ltd., for the financial years 2001-02 and 2003-04 is after deduction of Rs. 40.57 lakhs and Rs. 50.34 lakhs respectively being profit on sale of investments. iii. The principal business of Sri Ramdas Motor Transport Ltd., is sale of new vehicles and manufacture of motor parts. The freight income is 17.84%, 17.09% and 13.53% of the total turnover for the financial years 2002-03, 2003-04 and 2004-05 respectively. Hence the turnover and profits are not comparable. 87. By taking into consideration the circumstances in which the commission was paid, the commission paid for earlier assessment years and the commission paid by similar companies in similar circumstances and reasonableness of the payment, in our opinion, we can definitely quantify the excessive payment of commission at 15% of the total commission paid by the assessee for these assessments years under consideration before us. This disallowance at 15% of total commission paid by the assessee would meet the end....
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.... company paid huge sum of interest to secured and unsecured loan creditors. Therefore, interest attributable to loan funds diverted to sister concern for acquiring a capital asset has to be disallowed. On tat basis the assessing officer calculated interest at 12% on the opening balance fo Rs. 1,52,27,202 and the closing balance of Rs. 1,23,51,229 in the ledger account of M/s. TCI Industries Ltd., as appearing in the books of account of the assessee company. On that basis, he disallowed as notional interest in the sum of Rs. 16,00,000 in the assessment year 2000-01 and another sum of Rs. 48,00,000 calculated at 16% on the original advance of Rs. 3,00,00,000 in the assessment year 2001-02. 90. On appeal, the CIT(A) deleted the said amounts of disallowance made out of the deduction towards interest claimed by the assessee for both the years. Aggrieved by the orders of the CIT(A) for the assessment year 2000-01 and 2001-02, Revenue preferred the present appeals. 91. The Learned Departmental Representative strongly supporting the orders of assessing officer, submitted that the CIT(A) was not justified in deleting the disallowance made by the assessing officer for these years. 9....
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.... is no dispute regarding fact that the assessee has advanced the money for the purpose of acquiring office premises from TCI Industries Ltd and entered into MOU on 15th March 1999 and total amount advanced was at Rs. 2,20,00,000/- and not Rs. 3,00,00,000/-. It was provided in the said MOU that the possession of the premises would be given to the assessee company on or before 31st October 2001; and if the delivery cannot be given by the aforesaid date M/S TCI Industries Ltd; the owner would be entitled to reasonable extension of time. The purpose of advance of the for the purpose of business and that is for the purpose of acquiring a business premise in course of business activity and being so, even the interest paid on borrowed funds is allowable and there cannot be any disallowance on notional basis. We confirm the order of CIT(A) on this issue. Grounds of the Revenue on this issue are rejected. 94. The next common issue arising out of the departmental appeals, ITA No.794/Hyd/2007 for assessment year 2000-01; ITA No.21/Hyd/2005 for assessment year 2001-02; and in ITA Noi.795/Hyd/2007 for the assessment year 2003-04 relate to treatment of loss arising on sale of shares, alleged ....
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....s. 5,30,084 and short term in the aggregate sum of Rs. 20,072, as per details set out at page 2 of the paper-book Vol.III filed by the assessee for the assessment year 2003-04. While the assessee company treated the above transactions of purchase of shares and units as investments and accordingly computed the long term capital gains, deducting the indexed cost of acquisition from the respective amount of sale consideration received, which resulted figures of losses assessable under the head long term capital gain, the assessing officer treated the losses as speculative losses in view of the provisions contained in Explanation appearing under S.73 of the Act. 98. The learned Departmental Representative on the other hand, strongly supported the orders of the lower authorities and took us through the objects clause appearing in the Memorandum and Articles of Association of the assessee company, wherein clauses 3(2) & B(1) permit the assessee company to engage itself in the business of purchase and sale of shares of other companies. He also placed reliance on the following decisions- (a) CIT V/s. Lokmat Newspapers Ltd. (32 ITR 43)-Bom (b) CIT V/s. Sun Distributors and Mining C....
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.... the present case. 101 We have considered the rival submissions and perused the orders of the lower authorities and other material on record. We have carefully gone through the Explanation to section 73 which reads as follows: [Explanation : Where any part of the business of a company [other than a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources"], or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.] 102 Because of the above Explanation to section 73 which was introduced in the Act w.e.f. 1-4-1977, it is obvious that when any part of the business of the company consists of purchase and sale of shares of such companies, such companies shall for the purpose of section 73 shall be deemed to be carrying on speculation bus....
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....and same is confirmed. Grounds of the Revenue on this issue are rejected. 104 The next issue arising out of the departmental appeal, ITA No.21/Hyd/2005 for assessment year 2001-02 relates to addition of Rs. 79,13,246 made by the assessing officer by disallowance of bad debt claimed by the assessee, which has been deleted by the CIT(A). 105 The Learned Departmental Representative strongly supporting the order of the assessing officer submitted that the CIT(A) was not justified in directing the assessing officer to accept the long term capital loss computed by the assessee. 106 Learned counsel for the assessee, taking us through the relevant details in respect of the debts, which had been actually written off by the assessee company during the financial year relevant to assessment year 2001- 02, appearing at pages 411 to 422 of the paper-book Vo. II filed for the said year, submitted that these debts represent unrealized bills raised by the assessee by way of transport freight receivables from its customers. It is submitted that the debts in question represent non-payments due to disputes on account of rate difference, amounts deducted by customers due to shortages, damages ....
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....ssessee. In this case the assessee actually written off of the debt in its books of accounts and corresponding entry is also appearing the Profit & Loss account prepared for the year ending on 31-03-2001. Being so, the claim of assessee is in order and it is to allowed. We find no infirmity in the order of the CIT(A) and same is confirmed. 109. The next issue arising out of the departmental appeal, ITA No.21/Hyd/2005 for assessment year 2001-02 relates to the addition by the assessing officer by computing the long term capital gains on sale of three immovable properties, sold by the assessee during the financial year ending with 31.3.2001 at Rs. 3,43,58,163 as against assessable loss of Rs. 18,21,092 computed by the assessee. 110. The Learned Departmental Representative strongly supporting the order of the assessing officer submitted that the CIT(A) was not justified in directing the assessing officer to accept the long term capital loss computed by the assessee. 111 The learned counsel for the assessee, on the other hand, taking us through the details of immovable properties, which were sold by the assessee company during the financial year ending on 31.3.2001, relevant f....
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....ders of the parent company, we have to see what was the cost of acquisition of the property sold by the assessee. The book value as on 1-4-1996 could be considered as cost of acquisition for the purpose of computing capital gain. As per provisions of section 49 of the income Tax act, there is no special provision for computation of cost in respect of property vest with the company by way of scheme of arrangement approved by the competent court of law. The assessee got the property as successor by a scheme approved by High Court. Therefore, the value as appeared in the audited books of the transferor company would be the cost of acquisition for the assessee company. In view of this, we do not find any infirmity in the order of CIT(A) in taking the cost of value at the respective figure appearing in the audited books of account of the transferor in pursuance to the scheme sanctioned by the High Court. Grounds of the Revenue on this issue are rejected. 113. The next issue arising for consideration in the appeal of the assessee being ITA No.789/Hyd/2009 for the assessment year 2001-02, relates to validity of the re-assessment proceedings, initiated by the assessing officer by issuan....
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.... The CIT(A), on appeal of the assessee questioning the legality and validity of the reopening of the assessment, rejected the contentions of the assessee and upheld the action of the assessing officer in this regard. Hence, assessee is in second appeal for the assessment year 2001-02 on this aspect as well. 116. It is the contention of the learned counsel for the assessee that a bare perusal of the reasons put forth by the assessing officer for re-opening the assessment, would reveal that his action is based on mere change of opinion based on the reading of the judgment of the Honb'ble High Court in assessee's own case for the assessment years 1981-82 to 1984-85 cited supra. It is an admitted fact, as evident from the impugned orders of the lower authorities as well, that the assessing officer was fully conscious of the decision of the Hon'ble High Court in assessee's own case for the earlier years, and that the disallowance of 15% of the aggregate commission paid by the assessee company, was made by the assessing officer, after considering all facts and circumstances of the case, including the decision of the Hon'ble jurisdictional High Court noted above. Fu....
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....d applied their minds with reference to the facts and evidence on record and after considering the judgment of the Hon'ble jurisdictional High Court in assessee's own case for the assessment years 1981-82 to 1984-85, had disallowed a portion of such commission, vis. 15% by the assessing officer and 5% by the CIT(A), which shows that the issue whether the payment of commission by the assessee company was deductible as a business expenditure, wholly or partly, was duly considered and deliberated upon both by the assessing officer as well as by the CIT(A) in the course of original assessment proceedings for the assessment year 2001-02. 118. In view of the above, it is submitted by the learned counsel for the assessee that it is beyond all reasonable doubt that the attempt by the assessing officer to initiate the impugned re-assessment proceedings for the assessment year 2001-02 on the very same issue of commission is nothing but a clear case of change of opinion, which is not permissible in law. In support of this proposition, he placed reliance on the following case-law- (a) CIT V/s. Kelvinator of India Ltd. (320 ITR 561)-SC (b) Gemini Leather Stores V/s. ITO (100 IT....
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....right by making recourse to the provisions relating to reassessment under S.147 or revision under S.263 of the Act. In the present case, he submitted not following the decision of jurisdictional High Court is a mistake apparent from record, as held by the Supreme Court the case of Saurashtra Kutch Stock Exchange Ltd. (305 ITR 227); and the Punjab & Haryana High Court in the case of Ramal Babulal (334 ITR 776), which can be rectified only reopening the assessment under S.147 of the Act. 121. We have heard the rival submissions. We have gone through the written submissions of both the parties and other material on record and also the case-law cited by the parties. In this case the assessment order was passed on 31-03-2004 wherein the assessing officer disallowed 15% of commission payment. It is needless to say that at the time of passing the assessment order, the Judgment of jurisdictional High court in assessee own case for the assessment year 1981-82 to 1984-85 was very much available which was pronounced on 06-06-2002. The assessing officer duly considered the jurisdictional High Court judgment in assessee own case and disallowed 15% of commission payment. In view of this, the ....
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.... sale of land, taking the indexed cost of acquisition in terms of proviso to S.48 of the Act. The assessing officer however, while framing the assessment order dated 27.3.2006, observed that copy of the sale deed shows the stamp duty value of the land having been adopted for registration purposes at Rs. 30,57,000, as against the actual consideration of Rs. 5,54,323 received and recorded by the assessee company in its books of account. The assessing officer, therefore, invoking the provisions of S.50C of the Act brought to tax the sum of Rs. 25,02,677, being the difference between the recorded consideration of Rs. 5,54,323 and the value adopted for stamp duty purposes in the sum of Rs. 30,57,000 by way of deemed capital gains on the sale of the said land. On appeal, the CIT(A) confirmed the action of the assessing officer. Hence, assessee is in second appeal before us on this issue. 124. Learned counsel for the assessee submitted that the assessee had not received any consideration over and above the amount of Rs. 5,54,323 disclosed in the registered instrument of sale, and therefore, there is no justification for the addition made by the assessing officer, which is liable to be ....
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....ibuted dividends to its shareholders in its Annual General Meeting held on 29th August, 2003 in the aggregate sum of Rs. 189 lakhs, which amount is far in excess of the dividends received, and consequently, in view of the specific provisions contained in S.80M of the Act, the assessing officer should have granted deduction in the sum of Rs. 4,500 on this account. 131. The learned Departmental Representative on the other hand, supported the orders of the lower authorities. 132. We heard both the parties and perused the material on record. The provisions of section 80M reads as follows: "80M. Deduction in respect of certain inter-corporate dividends.-- (1) Where the gross total income of a domestic company, in any previous year, includes any income by way of dividends from another domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of such domestic company, a deduction of an amount equal to so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the first-mentioned domestic company on or before the due da....