TaxTMI 
TaxTMI 
2014 (6) TMI 1040
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.....12.2008. The assessment was finalized by making an addition of Rs. 49,25,296/- being the amount as kickbacks to the Iraqi authorities. The assessee filed the appeal before the CIT (A) challenging the reopening as well as making the addition on merits. The CIT (A) sustained the reopening, however, allowed the relief on merits. Now, the revenue is in appeal by taking the following grounds of appeal :- "1. On the facts and circumstances of the case, whether the Ld. CIT(A) was justified in deleting addition of Rs. 49,25,296/- made by the A.O. when the payment was made as kickbacks to Iraqi authorities as illegal payment within the provisions of Section 37(1) of I.T. Act and paid under the "Oil for Food Programme" of UNO and a CBDT Memorandum No.414/117/2005-IT (Inv,-1) dated 18.11.2005 read with Volcker Committee's Report which confirmed the illegality of the payments. 2. On the facts and circumstances of the case, whether the ld. CIT(A) was justified in admitting additional evidences in violation of Rule 46A when sufficient opportunities were provided by the A.O. to the assessee to file details. 3. The appellant craves leave to add, alter or amend any/a....
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.... purchase of goods or articles by the Government of India or even any company under the control of the Government. No such restriction a lies in the case of payment made by a private party for furthering its business interests. There is nothing on record to show that the payment was made to any mafia group or to other for any illegal purpose or against public policy. The Volker Commission's Report mostly concerns politicians and others who are Public Servants in the eyes of law. It does not mention any illegality on the part of a private Indian party. Any bar imposed by UN on supply of goods to Iraq also cannot debar an Indian party to do so unless the restriction is imposed by the Government of India through a legal process. In the present case, there was no such restriction on supply of goods or materials to Iraq imposed by the Government of India. In any case, the records show that even these contingencies also did not arise in this case as neither the name of appellant company has been proved to have figured in the Volker Commission Report nor has the payment been proved to be of the nature of a kick-back nor even it has been shown that the necessary permission from UN was ....
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....erial for the present purposes. 19. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. 20. As we part with the matter, we must make it clear that our references to the Volker Committee report were only with a view to analyse as to whether even if everything stated in the Volker Committee report is taken as correct and this report is taken as an admissible evidence, will the deductibility of expenses in the hands of the assessee will be hit by Explanation to Section 37(1). However, to what extent this report can be relied upon in income tax proceedings is still an open question. We leave it at that. 21. In the result, the appeal is dismissed. The decision of ITAT, Calcutta Bench in the case of DCIT vs. Rajrani Exports has been upheld by Hon'ble Calcutta High Court in ITA No.49 of 2013 dated 24th April, 2013 as under :- "The question suggested by the Revenue is as follows: "Whether on the facts and in the circumstances of the case the Tribunal was justified in law to dismiss the appeal of the revenue by conf....
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....as absolutely necessary for the assessee to make the impugned payments and, in any event, the commercial expediency of these payments has not even been called into question by the Assessing Officer The case of the revenue is confined to invoking the Explanation to Section 37(1). The objections to the said commission payments are, therefore, not sustainable in law, so far as deductibility under section 39(1) is concerned." Recently, ITAT, Mumbai Bench in the case M/s. Air Pac Exports vs. ACIT in ITA No.2981 - 2983/Mum/2012 dated 11th June,2014 has also deleted the addition made on the similar facts as under :- "Commission payments to third party, not to Iraq Govt, under export contract signed under United Nations "Food for Oil Programme", not hit by Explanation to Sec. 37(1); AO's reliance on Volcker Commission's report incorrect as it prohibited illicit commission payments to Iraq Govt., while in present case payments were made to third party and not to Iraq Govt.; No finding that third party had rendered services and commission paid to third party was diverted to Government of Iraq, thus directs AO to delete disallowance; Relies on co-ordinate be....