TaxTMI 
TaxTMI 
2012 (1) TMI 250
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.... 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 respectively, for the assessment years 2000-01, ....
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....tement 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 such persons before the assessing officer proves the fact that the e....
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....nt 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 assessing officer has not pointed out any specific case, where he did not find ....
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....gh 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 us through the statement filed giving information for the last 25 years, it was ....
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....s 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 such, the same was held by the Court to be in contravention of the public policy.....
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....ission 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 in his aforesaid affidavit was believed by the IAC, who directed the ITO in his order pass....
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.... 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(SC) (c) Salem Advocates Bar Association V/s. Union of India(2003) 1 SCC49(SC) 16.....
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....rough 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 notes; that instances of single payment of commission in respect of several consignments booked from different clienteles wer....
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.... 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 payees are not available in the self made vouchers and other documents produced on behalf of the Assessee Company. Some of the vo....
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....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 as against the facts and circumstances of the case considered by the Hon'ble High Court in the reported decision, and submitte....
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....(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 the assessee did not produce all the vouchers. He submitted that the allegation made on behalf of the Revenue is wholly incorrect and state....
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....dictory 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 Representative noted above. 26. The learned counsel for the assessee, on the issue of applicability of a precedent, invited our specific at....
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....imilarity 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 submitted that the aforesaid observations of the Hon'ble Supreme Court had been reiterated in The State of Orissa V/s. Sudhansu Sekhar Misra & Ors.(AIR 1968 S....
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....hether 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 of the business of transport of cargo carried on by the assessee company. According to judgment the finding recorded by the Tribunal, is based on "no evidence", but is ....
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....on 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 for carrying out programmes of conservation of natural resources. Section 35D deals with amortization of certain preliminary expenses and 35DD deals with amortization of expendi....
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.... 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 statement of the Jaipur Branch manager on the basis of the affidavit filed by Sri Dukhi Pande Regional Manager of Varanasi Branch, under whom Mr. V.N. Upadhyay, the new manager of Jaipu....
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.... 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 the Hon'ble Bombay High Court in the case of Sigma Paints (188 ITR 6). The payment vouchers giving the relevant details, including the names of the payees, and also bearing the signatures of ....
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.... 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 ingredients of an affidavit are that the statement or declaration is made by the deponent relevant to the subject matter, and in order to add sanctity to it, he swears or affirms the truth of the stat....
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...., 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 possession at the time of search. However, later in the course of assessment proceedings, the assessee filed an affidavit contradicting his earlier statement recorded u/s 132(4) at the time of search. In the background ....
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.... - 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 were no longer available with the tax department. Such an assertion by the assessee, after a long period of 15 years, was held by the Hon'ble Court to be nothing but false and an afterthought. 43. In the circumstances....
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....assed 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 assessee Company with that of the decision of the Hon'ble Bombay High Court in CIT vs. Sigma Paints Ltd. (1991) 188 ITR 6 (Bom) only on the ground, as recorded at page 713 of the reports(256 ITR), that it was not the case of th....
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....ee 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 and circumstances as in the case of the assessee herein, for each of the five years under appeal, have been considered:- a. CIT vs. Goodlass Nerolac Paints Ltd. (1991) 188 ITR 1 (Bom); b. CIT v. Sigma Paints Ltd. (1991) 188 ITR 6 (Bom)....
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....mpany 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 decide as a final judge of facts as to whether the case of the assessee that the amounts claimed to have been paid were actually paid should or should not be accepted in the absence of the names and addresses of the persons to whom the amounts were paid. Having....
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....he 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 ground that there were no addresses available in the vouchers. The assessee, however, submitted a letter stating that all the payments made by them were genuine, that the payments were made to several persons like carpenters and that they were not in a position to produce any of t....
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....er 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 (Born), their Lordships of the Hon'ble Bombay High Court held and observed at page 86 of the Reports inter alia as under: "2. The facts giving rise to this application are that the assessee carries on the business of the supplying mill stores to various mills. The assessee claimed a....
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.... 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). 58. In Saga Departmental Stores Ltd. v. CIT(A) (2010) 325 ITR 324 (Del), their Lordships of the Hon'ble Delhi High Court were considering the claim for deductibility of expenditure incurred by the assessee for payment of commission to taxi drivers, guides and other commission agents to the tu....
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....ring 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 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 notes and that instances of single payment of commission in respect of several consignments booked from dif....
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.... 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 gave photocopies of some of the receipted vouchers, by way of sample in each of the relevant years. The photocopies of such receipted vouchers given way of sample are as under: Assessment Year Page No. of the Paper Books 2000-01 237-256 of Volume- I 2001-02 236-305 of Volume- I 2002-03 173-207 of Volume- I 20....
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....on 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 different destinations, does not fall within the category of "extortions, haftas, bribes and/or protection monies", which are in the nature of payments for a purpose which is an offence or which is prohibited by law; and which alone fall within the purview of the new Explanation inserted under section 37(1) of the said Act. In that view of the matter, t....
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....e 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 collector imposed the conditions that the assessee has to deposit particular amour to the welfare fund. That the grant of the permit is governed by Southern States Regulation of Export of rice Order 1964. Under the above said regulation, the grant of permit has to be made by the collector on a reasonable and fair basis having regard to the facts and circumstances....
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....htly 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 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. 76. It may also found that in earlier years which were considered by jurisdictional High Court, the total commission payment was never disallowed. The amount of commission disallowed in those years ranged from 9.45% to 11.98%....
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....he 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 2726604 1.53 12000 12000 No appeal 1980-81 232095990 4560521 1.96 12000 12000 No appeal 1981-82 289773217 11852724 4.09 1285656 1285656 50000 1982-83 354292813 11847846 3.34 1420531 1420531 50000 1983-84 550238000 11842204 2.15 1275229 1275229 50000 1984-85 628096000 13322009 2.12 1259807 1259807 50000 1986-87 605510389 12831004 2.12 2561377 50000 Nil 1987-88 684193743 14485319 2.12 796....
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....lowance 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 disallowed 15% of aggregate commission paid by assessee company. The CIT(A), enhanced such disallowance to 100%. The assessee is in appeal before us. 85. For the assessment year 2004-05 and 2005-06, the Assessing Officer had disallowed 100% of the commission paid by the Assessing Officer. The same was confirmed by CIT(A) on appeal by assessee. 86. We have gone through the above disallowances made by lower authorities. There is no uniform disallowance in these assessment years though the facts and circumstances in all these assessment years similar. Considering judgement of Jurisdictional High Court, in our opinion the payment commission is excessive and it warrants disallowance. We have also compared the commission payment in similar line business which can be seen from below mention statement: Transport Operator FY Freight Income Profit b....
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....ance at 15% of total commission paid by the assessee would meet the ends of justice. Accordingly, we direct the assessing officer to disallow only 15% commission paid the assessee as excessive in these assessment years as inadmissible. 88. The next issue involved in the appeals of the Department, being ITA No.794/Hyd/2007 for assessment year 2000-01 and ITA No.21/Hyd/2005 for assessment year 2001-02, relate to disallowance of interest on borrowed funds on notional basis. 89. Facts of the case in brief relating to this issue are that the assessing officer while framing the assessment under S.143(3) read with S.147 for the assessment year 2000-01 observed that the assessee company had paid a sum of Rs. 3,00,00,000 by way of advance to M/s. TCI Industries Ltd. (earlier known as Transport Corporation of India) in terms of Memorandum of Understanding dated 15th March, 1999. The said company owned a manufacturing unit at Colaba Mumbai, more popularly known as Mukesh Textile Mills, which was closed in 1982. The said company was desirous of developing the landed property forming part of the said Textile Mills by constructing a multi-storeyed building thereon. The assessee-company was adm....
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....isallowance made by the assessing officer for these years. 92. The learned counsel for the assessee on the other hand, taking us through the relevant pages of the paper-book, including the audited Balance Sheets as on 31.3.1999 and 31.3.2000, submitted that the aggregate amounts advanced by the assessee company to M/s. TCI Industries Ltd. during the period 31.3.199 to 21.8.2000 aggregating in all to Rs. 2.21 crores, was far below the assessee's own funds, and the same formed insignificant part of the assessee company's share capital and reserves. It is submitted that the assessing officer has not brought any material on record to prove that the advances made by the assessee company for the proposed acquisition of office premises was in any way related to tee borrowed funds. There is no direct nexus between the amount borrowed by the assessee company and the amounts advanced by it to the group concern in question. In this view of the mater, it is submitted that the decision of the Hon'ble Supreme Court in the case of S.A. Builders V/s. CIT(288 ITR 1)(SC) clearly supports the case of the assessee and the disallowance made by the assessing officer, which is not justified,....
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.... loss arising on sale of shares, alleged to be speculative loss, under Explanation to S.73 of the Act. 95. Facts of the case in brief are that the assessee company had purchased on different dates 10,86,493 shares of TCI Infrastructure Finance Ltd. during the financial years 1996-97 and 1997-98 by way of investment. Further, the assessee company had also purchased on different dates 50,00,000 shares of Wheels International Ltd. during the financial year 1996-97 by way of investment. The shares of each of the said two companies were sold by the assessee company during the period from July, 1999 to February, 2000, which is within the financial year 1999-2000 corresponding to assessment year 2000-01. Taking into consideration the indexed cost of acquisition in terms of the second proviso to S.48 of the Act, the assessee company returned a long term capital loss, assessable to tax under S.45 of the Act in the aggregate sum of Rs. 40,88,440, arising to it on sale of the aforesaid shares of each of the said two companies. 96. Similarly, the assessee company had purchased 57,200 units issued by the Unit Trust of India under the 1964 Scheme, in the financial year 1997- 98 and 2,70,00 sha....
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....Sun Distributors and Mining Co. Ltd. (1993)68 Taxman 223(Cal) (c) ITO V/s. Big Apple Clothing Pvt. Ltd. (2010) 5 ITR (Trib) 44(Del) (d) Centurion Investment and International Trading Co. Pvt. Ltd. V/s. ITO(319 ITR (AT) 24(Del) (e) Gujarat Credit Corporation Ltd. V/s. ACIT(302 ITR (AT) 250(Ahd) 99. Learned counsel for the assessee, reiterating the contentions urged before the lower authorities, strongly supported the orders of the CIT(A). He subtitled that the provision of Explanation to S.73 is not at all applicable to the case of the assessee, inasmuch as it is applicable only when any part of the business of a company, other than the excluded categories consist in the purchase and sale of shares of other companies. In other words, according to him, Explanation to S.73 applies only when the business of a company is that of dealing in shares. The assessee company, he submitted does not deal in shares and the shares purchased by it were all along held by it as investments and this fact is also proved from its printed Balance Sheets wherein the investments in shares, etc. were all along reflected under the head 'investments' and not under the head 'stock in trade'....
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....peculation business. The explanation has also excluded the companies whose gross total income consists of mainly from interest on securities, income from business, capital gain and income other sources. In view of this explanation, it is to be shown that the assessee's business consists of purchase and sale of shares of other companies. The assessee company claims that it is not dealing in purchase and sale of shares. It is also admitted fact the assessee classified the shares and units of UTI as investment in its Balance Sheet and it was not held as current assets by treating as stock in trade. In our opinion, the shares and units of UTI held by the assessee as an investment portfolio and the mere provisions in the object clause of Memorandum and Articles of Association cannot be conclusive to hold that the assessee is carrying on the business in shares and to classify the same as stock in trade. As the assessee is not carrying on business in shares, it is not possible to us hold that Explanation to section 73 is applicable to assessee case. Accordingly, we are opinion that the Explanation to section 73 cannot be applied to the case of assessee. The judgement relied by ld. DR ....
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....ges and late deliveries, etc. as well as on account of inadvertent double billing, both at booking as well as delivery stations. It is submitted that the outstanding debts relates to the financial years 1996-97 to 2000-01 and most of the unrealized amounts are individually small, and the expenditure on litigation, would have been wholly disproportionate to the expected results. Taking us through page 423 to445 and 447 of the paper- book Vol.II for the assessment year 2001-02, it is submitted that the assessee follows a definite procedure before writing off the debt as bad, and invited our attention to pages 423 to 445 of the said paper-book, which contain the correspondence made for seeking legal advice in relation to the bad debts in question. He also drew our attention to page 487 of the said paper-book, which is Schedule 18 of audited Profit and Loss Account, to demonstrate that the debts in question were in fact written off in the books of account. M/s. Transport Corporation of India Ltd., Sec'bad 107 The learned counsel for the assessee further submitted that the issue is squarely covered in favour of the assessee with the decisions of the Hon'ble Supreme Court in TRF....
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....essment year 2001-02, which resulted in long term capital gains to the extent of Rs. 18,21,092, which are filed at page 516 of Vol.III of the paper-book for the assessment year 2001-02, learned counsel for the assessee submitted that each of these properties had vested in the assessee-company in terms of the Scheme of Arrangement approved by the Hon'ble High Court of Andhra Pradesh dated 13th July, 1998, copy of which alongwith relevant documents is filed at pages 517 to 562 of the said paper-book. It is submitted that cost of acquisition in the hands of the assessee-company in respect of each of the said immovable properties was taken at the respective figures appearing in the audited books of account of the transferor company, in terms of the Scheme sanctioned by the Hon'ble High Court. However, it is submitted that the assessing officer by the impugned assessment order dated 31.3.2004 passed for the assessment year 2001-02, took the cost of acquisition of these properties at NIL, on the ground that the assessee company did not pay any consideration for acquisition of the said properties, which vested in it in accordance with the Scheme of Hive off of the Division and Red....
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....ce under S.147/148 dated 25.,2.2008. 114. Facts of the case in brief are that the assessee company was originally assessed in respect of the assessment year 2001-02, vide order of assessment dated 31.3.2004 passed under S.143(3) of the Act. While framing the said original assessment, the assessing officer for the detailed reasons set out by him, disallowed an amount of Rs. 77,29,201, representing 15% of the aggregate commission payments amounting Rs. 5,15,28,011. The said assessment order dated 31.3.2004 was subject matter of appeal before the CIT(A), who vide his order dated 14.10.,2004, reduced the disallowance made by the assessing officer to 5% of the aggregate commission payments. Aggrieved by the order of the CIT(A), assessee as well as Revenue have filed appeals before the Tribunal, being ITA No.1214/Hyd/2004 of the assessee and ITA No.21/Hyd/2005 of the Department. During the pendency of the said two appeals before the Tribunal, the assessing officer issued notice dated 25.2.2008 under S.148/147 of the Act purporting to reopen the completed assessment of the assessee for the assessment year 2001-02. The reasons recorded by the assessing officer under S.148(2) of the Act be....
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.... that the CIT(A) had also duly considered the said decision of the Hon'ble jurisdictional High Court in the appellate proceedings arising out of the original assessment proceedings, and after considering the relevant facts and material on record as well as the said decision of the Hon'ble High Court reduced the disallowance out of commission payments from 15% made by the assessing officer to 5%. He pointed out that the assessment proceedings initiated by the assessing officer for teh assessment year 2001-02, by issuance of notice dated 25th February, 2008 under S.148/147 of the Act, was after the expiry of four years from the end of the relevant assessment year 2001-02. Our specific attention at this juncture is invited to proviso to S.147 of the Act, which lays down that where an assessment under S.143(3) has been made in the case of any assessee for any assessment year, no action shall be taken under S.147 after the expiry of four years from the end of the relevant assessment year, unless the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a n....
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....hakur Narayan Singh (56 ITR 234)-SC (d) Jindal Photo Films Ltd. Vs/ DCIT (234 ITR 170)-Del. (e) CIT V/s. Ramchandra Hatcheries (305 ITR 117)-Mad. (f) Purity Techtextile Pvt. Ltd. V/s. ACIT(325 ITR 459)-Bom. (g) Pradeep Trust V/s. CIT(325 ITR 1)-Cal. (h) ICICI Prudential Life Insurance Co. Ltd. V/s. ACIT(325 ITR 471)-Bom (i) Arthur Anderson & Co. V/s. ACIT(324 ITR 240) (j) D.T. & T.D.C. Ltd. V/s. ACIT (324 ITR 234)=Del. (k) CIT V/s. Goetze India Ltd. (321 ITR 431)-Del. (l) CIT V/s. K.K. Palanisamy (321 ITR 474)-Mad. (m) Inductor Ispat Aloys Ltd. V/s. AIT( 320 ITR 458)-Guj (n) CIT V/s. Empire Industries Ltd. (210 ITR 267)-Bom. (o) Manoo Lal Kedarnath V/s. Union of India (114 ITR 884)-All. 119. It may be noted at this juncture, that the learned counsel for the assessee has discussed the ratio laid down in the above decisions in the written submissions filed by him, and also furnished copies of the same in the relevant paper-book for the assessment year 2001-02. 120. The learned departmental representative, on the other hand, strongly supported the orders of the lower authorities. He submitted that the reopening of assessment was not prompted by mere change of opinion as ....
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....basis of very same judgment which was very much available for his consideration and also the assessment order was passed after duly considering the same. Further, the CIT(A) partly confirmed the disallowance by modifying the order of the AO and disallowed commission to the extent of 5% instead of 15% disallowed by assessing officer. Therefore, the order of assessing officer is merged with the order of CIT(A). Once the order of the assessing officer is merged with order of CIT(A), the assessing officer cannot exercise his power u/s 147 of the Income Tax Act to reopen the issue was decided by higher forum in the guise of income assessable to tax has escaped from assessment. There is no further question of any escapement of income from assessment when the CIT(A) considered the very same issue of payment of commission in the course of appellate proceedings before him under section 250 of the Act. The assessing officer could exercise the power of reopening of assessment on any issue if it is not subject matter of appeal before CIT (A) and it is before the CIT(A) for his consideration or if he has considered the same issue, in that circumstances, the AO is precluded from considering same....
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....and Haryana High Court in CIT V/s. Chandni Buchar (323 ITR 510) in support of his contentions in this behalf. 125. 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 lsos computed by the assessee 126. We considered the rival submissions and perused the orders of the lower authorities and other material on record. The ld. AR contended that it has actually received only consideration of Rs. 5,53,323/- as against the registration value of Rs. 30,57,000/- and relied on the judgement of Punjab of Haryana High Court in the case of CIT Vs. Chandni Boucher ( 323 ITR 510) wherein held that in the absence of any evidence, valuation done by stamp duty authorities could not be taken as actual sales consideration and the value shown in the sale deed had to be accepted. 127. We have gone through the above judgment. In that case before Punjab & Haryana High Court the assessee categorically proved that the consideration passed is the consideration shown in the Sale Deed. However, in the present case, the assessee not discharged the burden cas....
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....company, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year. Explanation : For the purposes of this section, the expression "due date" means the date for furnishing the return of income under sub-section (1) of section 139." 133. This section was deleted by Finance Act, 2003 w.e.f. 01-04- 2004. In this case, since the dividend received by the assessee does not exceed the amount of dividend distributed on or before due date, the said dividend received shall be allowed as deduction u/s 80M of the Act. The assessee has received only Rs. 4,500 and it has distributed Rs. 1,89,00,000 by way of dividend. Hence, we do not find any justification for disallowing the claim of the assessee. As such, the orders of lower authorities are set aside and the claim of the assessee is allowed. 134. In ITA No.21/Hyd/2005, the Revenue raised additional ground contesting that the CIT(A) has erred in admitting additional evidence in violation of Rule 46A. According to the Revenue, the CIT(A) ought to have followed the judgment of the Allahabad High Court in the case of H.Lal.Mohd. B. Works V/s. CIT in reference....