TaxTMI 
TaxTMI 
2021 (10) TMI 1042
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....d. CIT- (A), erred in allowing the commission paid to overseas agent M/s. Khadlaj Perfumes LLC, for the A.Y. 2008-09 without appreciating the fact that the assessee was unable to prove the need for commission @ 25% paid to M/s. Khadlaj Perfumes LLC, whereas commission incurred with other parties was @ 0.5% to 5.85%." 2. "On the facts and in the circumstances of the case and in law, the Id. CIT-(A), erred in deleting the addition made in respect of loan advanced to associated enterprises, M/s. Mellow Commodities SDN.BHD at arm's length price, without appreciating the fact that section 92 of the I.T. Act is clearly applicable to the transaction made with the associated entity." 3. "On the facts and in the circumstances of the case and in law, the Id. CIT-(A), erred in allowing the appeal of the assessee placing reliance on the decision of the jurisdiction Hon'ble ITAT, Mumbai Bench( Special Bench) in the case of M/s. All Cargo Global Logistics Ltd (137 ITD 287) , whereas the decision in All Cargo global logistics Ltd has been further contested in appeal and the decision of the Hon'ble Mumbai High Court is still pending." 4. The Appellant prays t....
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....s. He observed that during F.Y. 2002-03 no, commission was paid whatsoever to any overseas agent by the assessee. However from F.Y. 2003-04 to 2007-08, the assessee incurred overseas commission expenses to the tune of 29.27Crs. The commission was paid to a single party viz. M/s. Khadlaj Perfumes LLC., Dubai only in respect of product Afzal Pandharpuri. The AO has summarized the situation as per his analysis for Sopariwala Exports, the assessee, as follows: F.Y. QTY. CTNS SALES AMT. (in Lakhs) COMM.PAID (in Lakhs) REMARKS 2002-03 36249 1402 0 No Agent Appointed 2003-04 49416 1802 371 Agent appointed 2004-05 55361 2011 503 2005-06 67810 2489 622 2006-07 67738 3053 763 2007-08 72586 2698 668 6. Both during post search investigation as well as the assessment proceedings, the assessee was questioned regarding the high commission expenditure claimed in these years. The assessee submitted that they had appointed a single commission agent for the years in question viz. M/s. Khadlaj Perfumes LLC, Dubai, UAE, as the commission agent for Afzal Pandharpuri Tob....
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....ch was getting over in A.Y. 2004-05. He also noted it was in the A.Y. 2004-05 that the commission expenses started to be incurred in respect of M/s. Khadlaj Perfumes LLC, Dubai. He found fault with the assessee's inability to furnish the audited financial statements and the income tax details of the foreign commission agent and the non production of the Principal Officer, of the foreign commission agent. He noted that the assessee did not produce the correspondence and evidence of the service provided by the commission agent. He noted that though the sales increased from 22000 Cartons in A.Y. 2000-01 to 67800 Cartons in A.Y. 2006-07, there had been a similar increase from 18851 Cartons in A.Y. 98-99 to 36249 cartons in A.Y. 03-04, a period during which M/s. Khadlaj Perfumes LLC, Dubai was not appointed as overseas agent. The AO therefore concluded that it could not be said that this foreign agent was necessary and responsible for increase in sales from AY 2004-05 to AY 2008-09. Primarily the AO was of the view that the export of the assessee was thriving without any problem in the earlier years and therefore, the increase in sales in subsequent period could not be ascribed to t....
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....f of remittance by Indian Bank. ii) Copy of form no. A-2 being application cum withdrawal of foreign exchange for remittance of commission M/s. Khadlaj Perfumes LLC, Dubai. iii) Copy of certificate issued by M/s. Khadlaj Perfumes LLC, Dubai for sales executed during F.Y. 2003-04 to 2007-08." 11. Learned CIT(A) obtained remand report from the Assessing Officer as well as rejoinder from the assessee. Thereafter learned CIT(A) gave elaborate findings and deleted addition by holding as under :- "Now, I come to the merits of disallowance of expenses made in respect of commission expenses. It is the case of the AO that the agreement was entered into with M/s. Khadlaj Perfumes LLC, Dubai only when the deduction u/s. 80HHC was coming to an end, thereby suggesting the motive for the appellant to siphon out money from the firm. It is however, seen that the section 80HHC deduction was being claimed in respect of the entire exports which included both the trading exports as well as manufacturing exports, whereas the commission paid to Khadlaj Perfumes LLC is only in respect of branded product Afzal Pandharpuri. In the initial assessment years in question the tradi....
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.... 1749 9609 1158 002 2001-02 7689 41 90 1386 7500 1362 001 2002-03 10058 153 136 1735 10067 1722 024 2003-04 10363 510 555 1088 10279 1805 424 2004-05 10787 190 535 952 10770 2032 511 2005-06 8929 218 631 857 8895 2491 622 2006-07 9573 364 765 1214 8841 3064 763 2007-08 8640 717 670 1225 8665 2721 668 2008-09 12987 1760 1013 2788 12706 4528 1013 Combined Sopariwala Exports & Sopariwala Exports Pvt. Ltd. FY Sales in Cartons Sales Target US Dollar (Lakhs) Sales in Value in US Dollar (Lakhs) Rate in $/carton 2001-02 35716 0 28.57 79.99 2002-03 36249 0 29.00 80.00 2003-04 49416 40.00 39.53 79.99 2004-05 55361 46.00 44.29 80.00 2005-06 67810 52.90 56.12 82.76 2006-07 74323 60.84 63.84 85.89 2007-08 72656 69.96 66.96 92.16 2008-09 94864 80.45 98.75 104.09 5.9.23. A perusal of the above tables show that the AO is factually incorrect in cla....
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....-09 as against 17.25% for FY 2002-03, as can be seen from the table (supra) prepared from the audited financial statements. 5.9.25. The AO has found fault with the fact that a single sole selling agent was appointed. He has also found fault with the appellant's inability to produce this sole selling agent who is a foreign entity resident in another country. It is understandable that the appellant could not force the foreign commission agent to appear before the AO in India and to furnish the agent's tax returns. At the same time it is noted that there is no mention of any direct action taken by the assessing officer for verification of information in respect of the agent M/s. Khadlaj Perfumes, LLC, Dubai. AO could have sought for information in respect of this agent through proper channels from the authorities of UAE, a country with which Double Taxation Agreement has been entered into by India and the DTAA has a clause for exchange of information. 5.9.26. While the AO has held that the onus to prove genuineness of the export commission is on the appellant, the AO has ignored the evidences submitted by the appellant while framing the assessment order. Copy....
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....ment at much higher figures have been made by the appellant in respect of different consignments and 5.9.29. In respect of appointment of the commission agent in UAE, the appellant in its submission stated that it is well established practice that for doing business in Middle East there is a necessity for having a local partner. In this regard in the submission dated 09/01/14 the appellant submitted that in the UAE, business is to be done with local representative which is mandatory. Extract of notification issued by Ministry of Economy, UAE for establishing business/commercial activity in the UAE by non UAE business organization was submitted. In particular, the clause relating to commercial agency agreement was highlighted which is reproduced below: "4. Commercial agency agreement-Foreign companies may engage in a commercial agency arrangement which is defined as any arrangement whereby a foreign company is represented by a UAE agent to distribute, sell, offer or provide goods or services within the UAE for a commission or profit. The agent must either be a person holding UAE nationality or a company i.e. 100% owned by UAE nationals. The agent must be registered....
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....e the payment is approved by RBI, the entire amount is allowable, the case law cited was in the case of Turner Morrison & Co. Ltd.Vs.CIT (1987) 167 ITR 844 (Cal.). 5.9.32. From the discussion above, it is noted that the Annex. A-5 referred to in the assessment order is a loose paper file comprising mainly of unaudited balance sheet and stock report as on 31.03.08 in respect of various group companies. There is no incriminating document brought on record by the AO in respect of disallowance of commission expenses. The commission was being paid even prior to AY 2004-05 and even in respect of Afzal Pandharpuri. Commission payment even at rate of 32% had been incurred in earlier years. Scrutiny assessments were made for AY 2004-05 and AY 2005- 06, prior to search, and no disallowance of commission expenses were made. There is a generally accepted practice and requirement of appointing a local agent for business in Middle East. From the details of country wise exports called, it is observed that sales to UAE and Yemen fell at end of 2002-03 and beginning of FY 2003-04. The exports of Afzal Pandharpuri to UAE fell from Rs. 7.45 crores in FY 2002-03 to Rs. 6.36 crores in FY 2003-....
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....0, supports the grievance of the appellant that reasonable opportunity was not given to it in the assessment proceedings. The assessment order and the remand report indicates that the assessing officer's emphasis is on appellant maintaining meticulous documentary evidences for commission expenses. The appellant is not incorrect in claiming that business is not run with an eye on creating documentary evidence for everything. The disallowance cannot be made for AY 2004-05 and AY 2005- 06, sans incriminating documents, as per the ratio of the decision of the Special Bench in case of Al Cargo (supra). In view of the above facts and discussion, the action of the AO in disallowing the entire commission expenses is not tenable on merits. As regards the alternative contention of the assessing officer, I have already discussed earlier that the assessing officer has selectively considered the rates of commission on other products and other agents by ignoring the higher rates of commission without spelling out any reason. This action of the assessing officer is biased. Further, I am unable to agree with the view of the AO that even if the commission services is held as genuine, part of th....
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....learned counsel pleaded that the Assessing Officer sitting in the judgement of necessity of expenditure is totally unsustainable. In this regard he placed reliance on the following decisions :- * Sasson J. David & Co. Pvt. Ltd. Vs. CIT (118 ITR 261) * Shahzad-a-Nand & Sons Vs. CIT (108 ITR 358) * Voltamp Transformers Pvt. Ltd. Vs. CIT (129 ITR 105) 15. He further submitted that the contract between the parties is to be understood as is understood by the parties and Assessing Officer cannot give his own interpretation to the contract. In this regard he placed reliance upon the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Arun Dua (186 ITR 494). 16. Upon careful consideration, we note that the assessee in this case has paid commission to its overseas commission agent. Agreement has been duly submitted. Payment has been duly made to the overseas commission agents. The same is duly approved by the RBI. The Assessing Officer has questioned necessity of high rate of commission. In his opinion lower commission was to be paid. No case has been made out that the payment is bogus. In fact there was search and seizure operation at the pre....
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....o far as the assessee is concerned. Sec. 92 of the I.T. Act is attracted. The AO vide order sheet noting dated 14/12/10 asked the assessee as to why the interest on the said loan to its associate enterprise should not be brought to tax invoking the principle of Arms Length Price (ALP). The assessee submitted that the loan was given out of commercial expediency and was out of its own funds and the transaction was with the approval of RBI. This loan was subsequently converted into share capital. The religion of the partners of the assessee-firm prohibit charging of interest. The AO quoting the ITAT Delhi decision in the case of Perot Systems TSI held that even if the amount is given as quasi-capital like share application money, then also such amount is required to be considered as loan. On the principles of Arms Length Pricing, the interest on these loans has to be determined u/s. 92 of the I.T.Act. The AO considered the Arms Length rate of interest to be 3% to 4% above LIBOR. The AO considered LIBOR rate of interest to be around 6% p.a. He therefore, concluded that 10% p.a. is ALP rate of interest for all these assessment years. He accordingly determined the adjustment in this case....
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.... I.T. Act was filed. In the appellate proceedings in the submission filed on 22/02/13, the appellant submitted that the interest free amount given to its subsidiary company was with an intention to invest in the shares of its 100% subsidiary company. Since there was no provision to have subsidiary by a firm, the partners applied to avail the permission from RBI regarding the same. However, in view of the delay in formalities for the conversion of loan into equity shares the amount was reflected as loan to subsidiary in its books of accounts. It was submitted that in the assessment proceedings the appellant had furnished various details to the AO including copies of ledger accounts, copies of resolution passed of Mellow Commodities SDN.BHD for allotment of shares against amount received from share holders and copies of share certificate issued by Mellow Commodities SDN.BHD, 5.10.5. It was also submitted that no incriminating documents had been found during the search and as such addition u/s. 92 of I.T. Act could not be made in the order u/s. 153A by the AO. Copies of the assessment order u/s. 143(3) passed by Addl.CIT Rg.12(3) for A.Ys. 04-05 and 05-06, which is prior to t....
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....ounts of the subsidiary filed in appellate proceedings, it is seen that the authorised capital of the subsidiary was 100000 MYR at beginning of calendar year 2003 which increased to 500000 MYR by the end of 2003. This again was increased to 1000000 MYR by end of calendar year 2004. In calendar year 2006, MYR 430300 was shown as share application money. In calendar year 2007, the total share capital went up to MYR 190,42,700 and the share application money was converted into equity. Further, the AO has made half hearted attempt at determining the comparable. He has taken the LIBOR rate to be uniform 6% for the entire period of FY 2003-04 to FY 2007- 08 on the dates when the amount was advanced without identifying the LIBOR rate for the specific dates on which the amount was advanced and for specific tenure. Further, there is no basis given for determining the markup @ of 4% over LIBOR. Lastly and most significantly, the AO has not examined the true nature of transaction that the amount was advanced only as subscription to equity capital. The fact that the entire amount advanced was converted into equity was before the AO even as he framed the assessment order. It is a fundamental pr....
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....ed that the decision of ITAT Ahmedabad Bench is fully applicable on the facts of the present case as in that case Assessee gave advances to 'M', wholly owned subsidiary which was converted to equity capital on receiving RBI's permission. It was held that where advances were made, pending capital subscription, in a foreign subsidiary company, which played strategically significant commercial role in assessee's business, it was not a simplicitor financing transaction to be benchmarked with LIBOR plus rate, and therefore, comparable uncontrolled price for interest on such a transaction was nil. 23. Upon careful consideration we note that the assessee has given funds to its subsidiary initially which has been converted later on into equity capital. For the intervening period the Assessing Officer has charged 10% notional interest. The Revenue was relied upon the decision of ITAT Delhi Bench in the case of Perot System TSI India Ltd. (supra). We note that the facts of the case are different from the Parot System TSI India Ltd. (supra) referred by the Revenue. There was no issue of conversion of fund into equity in the case of Parot System TSI India Ltd. (supra). Howev....
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....ed Assessing Officer for disallowing the expenditure of Rs. 1,55,000/- incurred by the appellant on purchase of Goats for distribution to staff on the occasion of Eid festival celebration being employees welfare expenditure, without appreciating that the said expenditure is incurred wholly and exclusively for business and hence the said expenditure is allowable u/s.37 of the Income Tax Act. 2. On the facts and circumstances of the case and according to law, the Learned CIT (A) erred in confirming the order of the Learned Assessing Officer for disallowing the expenditure of Rs. 6,88,046/- incurred for providing food to employees during "Ramadan" month being staff welfare expenses, without appreciating that the said expenditure is incurred wholly and exclusively for business and hence, the said expenditure is allowable u/s. 37 of the Income Tax Act. 3. On the facts and circumstances of the case and according to law, the Learned CIT (A) erred in confirming the order of the Learned Assessing Officer for disallowing the expenditure of Rs. 3,00,000/- for obtaining special number for Motor Car without appreciating that the motor car was mainly used for foreign clients vi....
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....ned CIT(A) assessee pleaded that the assessee being in export business and foreign customers were visiting the office/factory and hence, this special number was useful. However, learned CIT(A) held that these cars are used by the directors and it is their personal fancy for obtaining special registration numbers. That this is certainly not a business expense. Hence, learned CIT(A) uphold the action f the Assessing Officer. 34. Against this order the assessee has filed the appeal before us. 35. It has been pleaded that in the alternative, depreciation should be allowed on the said expenditure. 36. Upon careful consideration, we find that the orders of the authorities below are appropriate that expenditure for obtaining "fancy number for the car" is not at all business expenditure. Hence, there is no question of allowing the same as revenue expenditure or capitalizing the same and allowing depreciation thereon. Hence, we uphold the order of learned CIT(A). 37. In the result, this appeal by the assessee stands dismissed. ITA No. 3043/Mum/2014 for A.Y. 2009-10 M/s. Sopariwala Exports Pvt. Ltd. 38. This is an appeal by the assessee and Grounds of appeal read as under :....
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....odowns etc. stock of various items was taken as per the inventories, copies of which have been handed over to you. The analysis of such physical stock taken as compared with the Book Stock is given below: Stock at place Excess Physical Stock Excess Book Stock Borsad, Gujarat 23,80,641 77,53,385 Vasna, Gujarat 14,418 6,44,935 Khanpur, Gujarat 4,69,354 21,31,482 Lalpur, Gujarat 12,10,582 60,543 Vijapur, Gujarat 59,428 6,47,916 Gandhidham, Gujarat -- 94,01,832 Vishnoli, Gujarat -- -- 41,34,423 2,06,40,093 Thus, there is excess Physical Stock of Rs. 4l,34,423/- on the one hand and excess book stock on the other hand of Rs. 2,06,40,093/-. Please note that the above analysis of excess stock has been done in respect of each item of your stock and in some items excess physical stock has been found whereas in some other items, excess book stock was identified. The overall analysis has been tabulated above. Since the item wise analysis of the stock has given the above result, you are requested to kindly explain as to why the excess physical stock should not be added to your Total Income u/s. 69 o....
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....used the records. We find that the addition in this regard is based upon the excess stock found during search and we do not find any infirmity in the order of the authorities below. Even the assessee is taking shifting stand partly accepting and partly denying the veracity of findings. This is not sustainable. Hence, we uphold the same. Apropos issue of excess cash found : 43. In this case the Assessing Officer noted that during the course of the search proceedings, cash of Rs. 2,00,000/- was seized. That the cash balance as per books at that time was Rs. 47,420/- and the cash seized was the excess cash found at that time. That the assessee was asked to explain why the amount of the seized cash of Rs. 2,00,000/- should not be added to the Total Income? Vide letter dated 29.10.2010. That the reasons given in the reply furnished, maintaining that the cash seized is explained as per the books, are not acceptable. That ttherefore, the amount of the seized cash would be added to the Total Income u/s. 69A of the IT Act. 44. Upon assessee's appeal learned CIT(A) noted that there is no specific ground in this regard and he treated the same as infructuous by observing as under : ....
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....ses. The cost of material increased by 12% to 14% and the expenses increased by 34% to 36% when the accounts of the assessee starting from A.Y. 2004-05 onwards was considered. The Assessing Officer noted that the main reason for increase in expenses is the increase in payment of commission on export of Afzal Pandharpuri (Afzal Pandharpuri Tobacco) the main branded product of Sopariwala Group of Companies. He observed that during F.Y. 2002-03 no commission was paid whatsoever to any overseas by the assessee. However, from F.Y. 2003-04 to 2007-08, the assessee incurred overseas commission expenses to the tune of 29.27Crs. The commission was paid to a single party viz. M/s. Khadlaj Perfumes LLC., Dubai only in respect of product Afzal Pandharpuri. The AO has summarized the situation as per his analysis for Sopariwala Exports, the sister concern of the assessee as follows: F.Y. QTY. CTNS SALES AMT. (in Lakhs) COMM.PAID (in Lakhs) REMARKS 2002-03 36249 1402 0 No Agent Appointed 2003-04 49416 1802 371 Agent appointed 2004-05 55361 2011 503 2005-06 67810 2489 622 2006-07 67738 3053 763 ....
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....62 03-04 36249 906225 1402 04-05 49416 1235400 1802 05-06 55361 1384025 2011 06-07 67810 1695250 2489 07-08 67738 3053 52. The AO concluded that no commission was paid till A.Y. 2003-04 to M/s. Khandlaj Perfumes LLC, Dubai. He noted that the assessee was getting the export benefit under the Provision of section 80HHC of the IT. Act which was getting over in A.Y. 2004-05. He also noted it was in the A.Y. 2004-05 that the commission expenses started to be incurred in respect of M/s. Khadlaj Perfumes LLC, Dubai. He found fault with the assessee's inability to furnish the audited financial statements and the income tax details of the foreign commission agent and the non production of the Principal Officer of the foreign commission agent. He noted that the assessee did not produce the correspondence and evidence of the service provided by the commission agent. He noted that though the sales increased from 22000 Cartons in A.Y. 2000-01 to 67800 Cartons in A.Y. 2006-07, there had been a similar increase from 18851 Cartons in A.Y. 98-99 to 36249 cartons in A.Y. 03-04, a period during which M/s. Khadlaj Perfumes LLC, ....
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....iew that in such eventuality reasonable commission payment should be not in excess of 2% of these sales. 54. Learned CIT(A) noted the following additional evidences were submitted : "The following additional evidence was requested to be admitted :- i) Copy of Board Resolutions in respect of engaging the commission agent. ii) Copies of invoice raised by M/s. Khadlaj Perfumes LLC, Dubai for commission along with proof of remittance by Indian Bank. iii) Copy of form no. A-2 being application cum withdrawal of foreign exchange for remittance of commission M/s. Khadlaj Perfumes LLC, Dubai. iv) Debit voucher issued by Indian Bank Fort for remittance of commission, v) Copy of certificate issued by M/s. Khadlaj Perfumes LLC, Dubai for sales executed during F.Y. 2006-07 to 2008-09. vi) Third party/customers confirmation for purchasing of Afzal Pandharpuri from the appellant company through Khadlaj LLC." 55. Learned CIT(A) passed an order on same line as in the case of 3060/Mum/2014 above. The same may be gainfully referred as under :- 5.9.21. Now, I come to the merits of disallowance of expenses made in respect of....
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.... 535 952 2166.09 66.99 2005-06 8929 218 631 857 2166.09 66.99 2006-07 4732 292 190 271 2166.09 66.99 2007-08 2625 584 2 92 0 2233.09 2008-09 2091 1561 0 1158 0 2233.09 Sopariwala Exports Pvt Ltd (Figs Rs/Lakhs) FY Sales Other Income Commission Expenses Exports Net Profits 2005-06 0 0 0 0 2006-07 4841 72 575 943 2007-08 6015 133 668 1133 2008-09 10896 199 1013 1630 Combined Sopariwala Exports & Sopariwala Exports Pvt Ltd (Figs Rs/Lakhs) FY Sales Other Income Commission Net Profits (PBT) Total Exports Exports Afzal Pandharpuri Commission for Afzal Pandharpuri 2000-01 9693 221 78 1749 9609 1158 002 2001-02 7689 41 90 1386 7500 1362 001 2002-03 10058 153 136 1735 10067 1722 024 2003-04 10363 510 555 1088 10279 1805 424 2004-05 10787 190 535 952 10770 2032 511 2005-06 8929 218 631 857 8895 2491 622 2006-07 9573 364 765 1214 88....
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.... looked at overall net profit of the appellant over the years. It will be naive to expect that the business environment will remain same across the years and that profitability will be maintained across the years. However, the AO has not examined the profitability of the product in respect of which the agent was appointed. The traded export sales has accounted for the falling profitability as is apparent from the accounts over a period. It is further noticed that the assessing officer has not considered the financial results for FY 07-08 and FY 08-09 which was available when he framed his assessment orders in December 2010. He stopped at FY 2006-07, while concluding that profitability has fallen after the agent was appointed. The net profit as % of sales for the combined entity was 21.46% in FY 2008- 09 as against 17.25% for FY 2002-03, as can be seen from the table (supra) prepared from the audited financial statements. 5.9.25. The AO has found fault with the fact that a single sole selling agent was appointed. He has also found fault with the appellant's inability to produce this sole selling agent who is a foreign entity resident in another country. It is understand....
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....on payment @ of 25% to Khadlaj Perfumes LLC as declared in the statements filed by the appellant over the years. It is therefore, apparent that the AO has merely on suspicion and with prejudged view held that the commission expenses are not allowable. He therefore ignored evidences which corroborate the contention of the appellant. Even in the alternate plea recorded assessing officer in the assessment order, the conclusion that the commission payment to other commission agents ranges only from 0.5% to 5.88% is factually incorrect. A perusal of the statement of commission rates in the chart incorporated in the assessment order itself shows that there is a commission payment of 8.73% to Al Kedah, which has been conveniently ignored by the AO. In any case, as I have already mentioned earlier, the commission payment at much higher figures have been made by the appellant in respect of different consignments and products. 5.9.29. In respect of appointment of the commission agent in UAE, the appellant in its submission stated that it is well established practice that for doing business in Middle East there is a necessity for having a local partner. In this regard in the submissi....
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....the assessing officer at subsequent date. 5.9.31. The appellant has relied upon the following decisions. i)CITvs Sales Magnesite Pvt Ltd. (1995) 214 ITR 1 (Bom) ii) Amarjothi Pictures vs CIT (1968) 69 ITR 755 (Mad) iii) CIT vs Rajarani Exports Pvt Ltd. (2013) 217 Taxman 84 (Calcutta) iv) Aluminum Corporation of India Ltd. (1972) 86 ITR 11 (SC). v) CIT vs Nestle India Ltd. (2011) 337 ITR 103 (Delhi) vi) J K Woollen Manufactures vs CIT (1969) 72 ITR 612 In respect of the argument that once the payment is exclusively for business, it is not open to the AO to go into the reasonableness of the payment, the case laws cited were J K Woolen, Aluminum Corporation of India Ltd. and Pheros & Co. Pvt. Ltd. Vs. CIT (1980)124 ITR 188 (Gau). For the proposition that where the payment is approved by RBI, the entire amount is allowable, the case law cited was in the case of Turner Morrison & Co.Ltd. Vs. CIT (1987) 167 ITR 844 (Cal.). 5.9.32 From the discussion above, it is noted that the Annex. A-5 referred to in the assessment order is a loose paper file comprising mainly of unaudited balance d stock report as on 31.0....
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.... products and action against infringement of copyrights, confirmation of the commission agent evidence of sales executed with the help of the agent. These evidences support the case of genuineness of commission payment. The commission payments and the rates are disclosed in the application filed with RBI which has allowed the same. In case of commission exceeding 12%, the details have to be mentioned and remittance of commission requires RBI approval. It is reasonable to expect that the appellant cannot force the foreign commission agent to furnish its audited financial statements and tax returns and to force the principal officer of the foreign agent to appear before the assessing officer. That the issue of commission expenses was taken up through the assessing officer's letter dated 8-12-2010 and appellant's reply dated 22-12-2010, supports the grievance of the appellant that reasonable opportunity was not given to it in the assessment proceedings. The assessment order and the remand report indicate that the assessing officer's emphasis is on appellant maintaining meticulous documentary evidences for commission expenses. The appellant is not incorrect in claiming that....
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....ransactions relevant to A.Y.2010-11. The Assessing Officer has clearly erred in "transplanting" findings from the assessment order of A.Y.2009-10 in the assessment order of A.Y.2010- 11. Therefore, in my view, the Assessing Officer was not justified in making the disallowance of Rs. 9,81,01,411/-. In any case, the CIT(A)-37, Mumbai in his order dated 24/02/2014 in Appeal No.CIT(A)-37/IT-514 to 516/ACCC-44/12- 13 has deleted the corresponding addition for A.Y.2009-10." 57. For A.Y. 2011-12 also learned CIT(A) followed earlier year order and has concluded as under : "6.3.9. In this regard, reference is made upon the Judgment of the Honorable Calcutta High Court in case of CIT v Rajarani Exports Pvt Ltd, ITA No.49/2013, G.A. No.480/2013 and G.A. No.483/2013 in which the Hon'ble High Court observed as under : "It is observed that the commission on export activity had been fully disclosed in all correspondences and activities in relation to export, the commission was paid through banking channel of RBI approval and it was paid pursuant to an agreement approved by Government of India and UN. The payment of commission was for business consideration and there was a....