TaxTMI 
TaxTMI 
2017 (7) TMI 994
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....ot file the necessary evidence / documents to substantiate its claim during the course of assessment proceedings." 2. Briefly stated facts of this case are : assessee company is into the export business and during 1980's, it started international merchant trading by procuring export order from foreign buyers generally foreign sovereign governments and departmentsundertaking and export the same to them. The company has supplied plant and machinery, agriculture equipments and consumables. During scrutiny proceedings, certain claims made by the assessee in the return of income could not be substantiated i.e. commission paid to the service agents. 3. During the year under assessment, the assessee claimed to have paid an amount of Rs. 7,33,09,398.93 to different service agents as commission. To verify the genuineness of the services rendered, assessee was called upon to produce the copy of agreement entered with the service agents as well as invoice raised by the service agents with the details of the nature of transaction entered between them. Assessee furnished statement showing the FOB value of the exports to the parties where agency commission is payable along with statement o....
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....e Rs. 91,88,758 Total Commission Rs.7,08,59,575 that the assessee has debited a sum of Rs.7,33,09,398/- in the profit & loss account as commission paid to the different services agents, details thereof is as under :- Name of the commission agent Amount ESBJ Trading & Invt., Singapore 6425066.97 Kwame Okyere Akosa, Ghana 5163118 Solis Intertrade Inc 2449824 Trans Engg. Co., Sudan 37489183.96 TEODA Engg. Ghana 17055087 Mamoom Gamal Sudan 1248338 Soils Inter Trade Inc. B. Faso 2449824 Amount paid below 5 lacs 1028957 Total 733093398 that the services agents to whom the commission was allegedly paid have not raised any invoice for the services rendered by them; that in the Volkar Committee Report in connection with UN Oilfor- Food Programme for Iraq, the name of M/s. Mohan Exports India Limited, the assessee in this case, figured as a contractor for supply of humanitarian goods to Iraq; that as per agreement, the export proceeds were to be realized in 36 monthly installments starting after 12 months form the mean date of ship of the goods, meaning thereby the realization of installments would become ....
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.... corresponding expenditure had to be provided to match cost with revenue in order to arrive at the actual commercial profit; (iii) that even otherwise, the export proceeds were to be realized in 36 monthly installments starting after 12 months from the mean date of shipment i.e. May 2007 onwards and in these circumstances, the part of the commission payment had to remain payable at the time of assessment proceedings or thereafter; (iv) that as per RBI Guidelines, the payment of commission has to be allowed by the designated bank either way of remittance or by deduction from invoice value on the application of the exporter. This condition laid down by RBI is to check the genuineness of the business transactions and payment made to the service agent; (v) that the second ground for disallowing the claim of payment of commission to the service agent that the agreement does not suggest any specific reference to any specific service rendered to the agent to the assessee company is, "also not tenable for the reasons inter alia that in each agreement, the services to be rendered by the commission agents are extensively elaborated, which are as under :- Sl. No.....
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....tion with local sub-contractors 2.15 Provide services during warranty period etc. 2.16 Any other assistance including after sales services 4 Teoda Ltd. P.O. Box ct 4884 Cantonments, Accra Ghana. (Agreement dt. 02.03.04) In respect of Ministry of Energy, Ghana 1 Assistance in bidding for and finalizing contract 1.1 Maintain close and constant liaison 1.2 Advise assessee of important developments 1.3 Help to finalise the offer and sign contracts 1.4 Procure documents & Couriers them 1.5 Obtain technical information and Clarifications as asked by the assessee 2.1 Arrange for approvals in Ghana 2.2 Follow up for approval of all drawings and documents 2.3 Pursue establishment of L/c, Advance payments etc. 2.4 Pursue amendments to contracts 2.5 Arrange for getting technical details / drawings and samples approved by MOE. 2.6 To keep the assessee informed of developments 2.7 Organise and plan visit of MOE Technical personnel to India 2.8 To visit India for discussion 2.9 Coordinate clearance of goods at the Port and th....
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....f 3 years is not acceptable to the prudent person is also not sustainable when this fact is examined in the light of the fact that export proceeds were to be realized in 36 installments starting from May 2007 onwards and mercantile system of accounting is being adopted by the assessee company. When the assessee company is to get the export proceeds up to 2010 the spreading of payment of agency commission up to 2010 would be the natural consequence; (viii) that agency agreement entered into between assessee company and Trans Engineering Company of Sudan, available at pages 68 to 73 of the paper book, is categoric enough to elaborate the services to be rendered by the service agent to the assessee company in order to execute the export order; (ix) that ld. CIT (A) has discussed the issue threadbare as to the services rendered by the service agent to the assessee company without which the service order would not have been completed / executed; (x) that the assessee company has been making payment of such agency commission in the preceding years right form FY 2000-01 to FY 2004-05, as is tabulated in para 6, which have been allowed by the Revenue and the agen....
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.... ANGOLA 4,92,45,541.70 5 MOZAMBIQUE 1,58,84,976.00 6 SUDAN 1,10,40,87,264.86 7 AFGHANISTAN 9,51,62,275.40 8 ALGERIA 4,54,696.00 9 BURKINA FASO 1,92,31,350.00 10 NIGERIA 12,78,465.00 11 ZAMBIA 91,32,373.00 TOTAL 1,67,23,25,684.18 LOCAL SALES 2,57,500.00 EXCHANGE FLUCTUATION ag. EXPORTS 42,82,881.07 TOTAL SALES 1,67,68,66,065.25 It is apparently clear that no export whatsoever has been made by the assessee company to Iraq and in these circumstances, the question of making payment of illegal gratification to Saddam Hussain and his close associates does not arise; (xvii) that when the assessee has made export to the countries other than Iraq "Volkar Committee Report" has no bearing whatsoever qua the assessee company pertaining to the year under assessment; (xviii) that when no export during the year under assessment has been made by the assessee to Iraq, the reliance by the AO on Volkar Committee Report which undisputedly contains the name of the assessee company, is highly misconceived and misplaced; (xix) that....