TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1042
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....erseas 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 that the order of the CIT-(A), on the above grounds be set aside and that of t....
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.... 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 Tobacco in the Middle East market. The benefits from the appointment of commission agent were stated to be:- * The product captured 100% market share in the Middle East. * T....
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....e 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 the agent and that there was no significant change after the appointment of M/s. Khadlaj Perfumes LLC, Dubai. The AO did not find the explanation of the assessee in respect of the services provided by M/s. Khadlaj Perfumes LLC, Dubai - as satisfactory and the services genuine since th....
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....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 trading export was much larger than the manufacturing exports. It is further noted that the product Afzal Pandharpuri was only one of the products out of the manufacturing exports. The commission agreement is entered into only in respect of the branded product Afzal Pandharpuri. It is important to note that despite search carrie....
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....ed 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 claiming that there was no commission payment in F.Y. 2002-03. In F.Y. 2002-03 the total commission paid was Rs. 136 lacs and not Zero as mentioned in Page 2 of the assessment order. It is also seen that the product mix of exports has undergone a change over the years. Whereas Afzal Pandharpuri comprised only 12% of exports for F.Y. 2000-01, its share increased in total exports and it comprised 35.64% of exports in F.Y. 2008- 09. It is also observed that the sale of Afzal Pandharpuri prior to the appointment of the commission agent was 36249 Cartons in FY 2002-03 which has gone up to 94864 Cartons in F.Y. 2008-09, an incre....
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....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 of documents submitted by the appellant indicating the fake product in the export market has been discounted by the AO. The copy of email, invoices of the commission agent, confirmation by the Commission agent, details of address and telephone numbers of the agent, submitted by the appellant, has been ignored by the AO. 5.9.27. From the details available on the records it is seen that the commission was being paid even in the case of Afzal Pandharpuri in the earlier years. For instance in F.Y. 2002-03, in respect of Afzal Pandharpuri commission @ of 14.14% was paid to AI-Falaq Trading, @ 13.91% to Khatri Trading Co. and to several other ....
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....ular, 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 with the Ministry of Economy. Unless otherwise agreed in writing between a foreign company and its commercial agent, an agent is entitled to receive a commission on the sale of products in his or her designated Emirate irrespective of whether such sales are made by or through the agent." It was thus argued that since the appellant wanted to increase its business in this region and for protecting its business interest in UAE and other countries the commercial agency agreement was necessary. Thus it is out of business expediency and considering the status of the distributors and its capacity to achieve the requirements of the appellant, M/s. Khadlaj Perfumes, LLC, Du....
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....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 2003-04. Similarly exports to Yemen fell from Rs. 2.53 crores in FY 02-03 to Rs. 1.61 crores in FY 2003-04. This corroborates the claim of the appellant that its sales was getting affected by availability of spurious and duplicate products necessitating appointment of a strong sales agent. The sales of branded product Afzal Pandharpuri went up manifold, both in terms of value and quantity, even after increasing the sales price, after the appointment of Khadlaj Perfumes LLC, Dubai. The details of the commission agent giving name and address was furnished. The AO did not seek verification of details regarding the foreign agent by using the DTAA provisions for exchange of information and unreasonably insisted on the appellant to furnish financial stat....
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....ds 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 the payment should still be disallowed as unreasonable. Once the services is held to be genuine, it is not for the AO to sit in judgment on the reasonableness of the payment. In any case there is no evidence that the payment has been siphoned off. The commission agent is an independent third party. I therefore do not uphold the alternative argument of the AO. Ground of appeal no. 8 is allowed for all the AY. 2004- 05 to AY. 2008-09. 12. Against the above order the Revenue is in appeal before us. 13. We have heard both the parties and perused the records. Learned Departmental Representative supported the order of the Assessing Officer. He submitted that the only evidence for service rendered by the commission agent is the agreement entered into....
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....id 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 premises of the assessee and no evidence was unearthed that the payments were bogus and non-genuine. Names and address of the overseas commission agents were very much there with the Assessing Officer. He insisted the assessee to produce principal officer of the overseas entity. The Assessing Officer has made no effort whatsoever to make any independent examination of his own. He sits in the shoes of the businessman and decided that lower rate of interest should have been charged. In our considered opinion this is legally totally unsustainable. Hon'ble Supreme Court decision referred by learned counsel hereinabove duly supports this proposition. Learned CIT(A) has elaborately examined the issue and after detailed analysis of the factual data has come to the conclusion that....
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.... 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 and accordingly made adjustment on the basis of ALP for each of the assessment years. 19. Upon assessee's appeal learned CIT(A) deleted the addition by holding as under : "It is seen from the above that the amount advanced to the subsidiary in F.Y. 2003-04 was converted partly into equity of the subsidiary company and was therefore not in the form of loan (Rs. 30.02 lakhs). Another part was converted in FY 2004-05. Thus the entire amount of Rs. 66,99,900/- (including that converted in FY 2003-04) was already converted into equity to that extent. The AO has considered loan of Rs. 9,31,36,250/- during the FY 2003-04 as interest free and computed the adjustment on the same @10%. The action of the AO in treating at least this amount converted into equity in its subsidiary, as interest fre....
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.... 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 the date of search, was filed. 5.10.6 It is noticed that in the assessment order there is no reference to any incriminating seized material found during the course of search on this issue. As discussed earlier in respect of disallowance of commission, the Hon'ble ITAT Spl. Bench in the case of Al Cargo Global Logistic Ltd. Vs. DCIT has held that in respect of completed assessments, no addition can be made which is not based on any incriminating material found in the course of search. To that extent such addition in the present case cannot be made up to A.Y. 2006-07. 5.10.7. Coming to the merits of the case it is seen that the AO has not examined the nature of transaction carefully. Firstly, there is ample evidence that the amount advanced by appellant to its subsidiary was for investing in its equity. Th....
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....s 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 proposition of Transfer Pricing that the true character of the transaction has to be considered before applying the ALP. The contractual terms, the economic circumstances, the nature of transaction, the business purpose and strategy - all have to be considered before a comparable is sought. In the present case, such an analysis would indicate that the amount was advanced as towards equity and not as commercial loan. There was some delay in converting the advances in to equity, but the same is explained as delay in getting the necessary approvals. If at all LIBOR is considered, appropriate adjustments have to be made to account for the difference in the transaction being evaluated, which in the present case is quasi equity. In my view, in the facts and circumstances of this case and the case law in the case of Micro Inks Ltd., the imp....
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....erest. 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). However in the present case the plea is that fund transferred was for conversion into equity and there was some procedural delay. This has been accepted by learned CIT(A) on the touchstone of the ITAT Ahmedabad decision in the case of Micro Inks Ltd. (supra). We find that the proposition that transfer of fund for equity capital does not attract transfer pricing adjustment is thus supported by ITAT decision as above. Accordingly, we uphold the order of learned CIT(A) in this regard. Apropos ground No. 3 24. We note that this ground of appeal only arises qua ground No. 2, where learned CIT(A) has not only deleted the addition on merit but has held that upto A.Y. 2006-07 he has also deleted the addition on the ground that no incriminating material was found and these were completed assessment. We find that ground raised by the Revenue in this re....
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....e 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 visiting the appellants registered office for business purpose and the manufacturing unit at Borsad, Gujarat and the appellant being in Export business, the foreign customers visiting the office/factory appreciate special number of cars since they are easily indentified and remembered and aids to the status of the appellant and hence, the expenditure was incurred wholly and exclusively for business and the same may be allowed u/s.37 of the Act. 3.1 Without prejudice to above, the expenditure of Rs. 3,00,000/- for obtaining Special number for motor car may be capitalized and depreciation may be allowed on the same. Apropos staff welfare expenses (Ground No. 1&2) : 28. The AO disallowed Staff Welfare expenses under which expenses of Rs. 6,88,046/- was claimed on Ramzan celebrations. The AO also disallowed expenses claimed of Rs. 1,55,000/- on account of purchase of goats fo....
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....ciation 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 : 1. On the facts and circumstances of the case and according to law, the Learned CIT (A) erred in confirming the order of Learned Assessing Officer for addition of Rs. 7,99,196/-being alleged excess physical stock computed by the learned search party despite the note on variation explaining the errors and omissions and without rejection of books of accounts and hence the addition may be deleted. 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 addition of Rs. 22,31,126/- and computing GP margin @ 55% on Rs. 40,56,593/- being alleged excess book stock computed by the learned search party despite furnishing a note on variation explaining the errors and omissions by the learned search party and without rejecting the Books of Accounts and hence the addition may be deleted. 3. The learned CIT(A) failed ....
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....em 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 of the IT Act and also, why the excess Book Stock should not be added to your Total Income considering the same to be your unaccounted sales?" In response to the above, the assessee has furnished a reply vide its letter dated 24.12.2010, where-in after a detailed exercise of verifying the items of stock, a net of Excess Physical Stock of Rs. 7,99,196/- and a net Excess Book Stock of Rs. 40,56,593/- has been worked out. The reasons given in the submissions regarding the issues involved are prima-facie acceptable and so the additions on account of excess stock would accordingly be made. The addition would be reckoned on the figure of the excess Book Stock at the Gross Profit margin of the product. Thus, on account of Stock discrepancies, the addition resulting to the Total Income would be as follows: i) Excess Physical Stock : Rs. 7,99,196/- ii) Excess Book Stock : Rs. 22,31,136/- of Rs. 40,56,593/- @ G.P. Margin of 55% 40. Upon assessee's appeal learned CIT(A) confirmed the act....
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....ppeal learned CIT(A) noted that there is no specific ground in this regard and he treated the same as infructuous by observing as under : "In the grounds of appeal filed for AY 2009-10 there is no ground in respect of addition made by the AO in respect of cash of Rs. 2,00,000/- that was seized. The was added by the AO u/s. 69A of the IT.Act. However, in the subsequent appellate proceedings the appellant has filed ground wise submissions in which a submission has been made in respect of cash seized. Since no specific ground of had been filed in respect of the addition of Rs. 2,00,OOO/- by the AO in the appeal filed on 31.01.2011 the submission filed on this issue is treated as infructuous." 45. Against this order the assessee is in appeal before us. 46. We have heard both the parties and perused the records. We find that the assessee has contended that it was never a case the assessee has not pressed for this ground. Hence, in our considered opinion this issue has been left unadjudicated by learned CIT(A). Moreover the Assessing Officer has rejected the assessee's explanation without mentioning as to what was the explanation. Hence, in the interest of justice we remit this issue....
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.... 2005-06 67810 2489 622 2006-07 67738 3053 763 2007-08 72586 2698 668 50. 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 Tobacco in the Middle East market. The benefits from the appointment of commission agent was stated to be :- * The product captured 100% market share in the Middle East. * The duplicate products sold by business rivals were eliminated. * Consequent to the appointment of the agent the sale price of the product increased by 14% during F.Y. 2005-06 and 10% during F.Y, 2007-08. Despite the increase in sale price, the sales did not suffer a decline. * Commission paid to the agent includes the cost of sales promotion, door to door marketing and other incidental expenses. * It also protects the company's product from infringement of the company's brand. * Commission agent is also responsibl....
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....as 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 the agent and that there was no significant change after the appointment of M/s. Khadlaj Perfumes LLC, Dubai. The AO did not find the explanation of the assessee in respect of the services provided by M/s. Khadlaj Perfumes LLC, Dubai - as satisfactory and the services genuine since the evidence of such services in the form of correspondence, email, faxes etc; were not produced. He also mentioned, without naming, that 2 family members of the assessee group are permanent residents of Dubai for several years, the details of which were not submitted by the assessee. He treated the commission agreement as a self serving document. The AO referred to the statement recorded of Shri Arif Abdul Fazlani u/s. 131 of the I.T.Act on 28/12/10, just prior to finalization of the assessment order. The AO concluded that from the answer....
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....adlaj 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. Firstly, in the case of this appellant, no 80 HHC deductions were claimed, and the assessment years under question are AY 2007-08 to AY 2009-10. It was claimed in case of Sopariwala Exports, a sister concern. It is however, seen that the 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 trading export was much larger than the manufacturing exports. It is further noted that the product Afzal Pandharpuri was only one of the products out of the manufacturing exports. The commission agreement is entered into only in respect of the branded product Afzal Pandharpuri. It is important to note that despite search carried out, no incriminating evidence was found to prove that the commission payment was bogus. 5.9.22. It is also seen that the business of export in the appellant firm S....
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....001-02 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 claiming that there was no commission payment in F.Y. 2002-03. In F.Y. 2002-03 the total commission paid was Rs. 136 lacs and not Zero as mentioned in Page 2 of the assessment order. It is also seen that the product mix of exports has undergone a change over the years. Whereas Afzal Pandharpuri constituted only 12% of exports for F.Y. 2000-01, its share increased in total exports and it constituted 35.64% of exports in F.Y. 2008- 09. It is also observed that the sale of Afzal Pandharpuri prior to the appointment of the commission agent was 36249 Cartons in FY 2002-03 which has gone up to 94864 Cartons in F.Y. 2008-09, an increase of about three times. The sales in US dollars has also exceeded the targets in the period F.Y. 2003-04 to 2008-09 when the commission agent was operating. Even ....
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....ent 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 of documents submitted by the appellant indicating the fake product in the export market has been discounted by the AO. The copy of email, invoices of the commission agent, confirmation by the commission agent, details of address and telephone numbers of the agent, confirmation of buyers regarding role of the agent, submitted by the appellant, has been ignored by the AO. 5.9.27. From the details available on the records it is seen that the commission was being paid even in the case of Afzal Pandharpuri in the earlier years. For instance in F.Y. 2002-03, in respect of Afzal Pandharpuri commission @ of 14.14% was paid to AI-Falaq Trading, @ 13.91% to Khatri Trading Co. and to several other parties. Even in F.Y. 2003-04 commission was paid @ 22.91% to Naji Nasir and @ 18.18% to Abbas Ibr....
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....ement-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 with the Ministry of Economy. Unless otherwise agreed in writing between a foreign company and its commercial agent, an agent is entitled to receive a commission on the sale of products in his or her designated Emirate irrespective of whether such sales are made by or through the agent." It was thus argued that since the appellant wanted to increase its business in this region and for protecting its business interest in UAE and other countries the commercial agreement was necessary. Thus it is out of business expediency and considering the status of the distributors and its capacity to achieve the requirements of the appellant it, M/s. Khadlaj Perfumes, LLC, Dubai was appointed as the distributor of Afzal Pandharpuri", their brand product on the terms and conditions as per distribution agre....
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....pted 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 2003-04. Similarly exports to Yemen fell from Rs. 2.53 crores in FY 2002-03 to Rs. 1.61 crores in FY 2003-04. This corroborates the claim of the appellant that its sales was getting affected by availability of spurious and duplicate products necessitating appointment of a strong sales agent. The sales of branded product Afzal Pandharpuri went up manifold, both in terms of value and quantity, even after increasing the sales price, after the appointment of Khadlaj Perfumes LLC, Dubai. The details of the commission agent giving name and address was furnished. The AO did not seek verification of details regarding the foreign agent by using the DTAA provisions for exchange of information and unreasonably insisted on the appellant to furnish financial statements, tax returns of its foreign agent and insisted on the production of the foreign agent before the ....
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....s 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 the payment should still be disallowed as unreasonable. Once the service is held to be genuine, it is not for the AO to sit in judgment of the reasonableness of the payment. In any case there is no evidence that the payment has been siphoned off. The commission agent is an independent third party. I therefore do not uphold the alternative argument of the AO. Ground of appeal no. 8 for A.Y. 2007-08 and AY2008-09 and Ground no. 9 for AY. 2009-10 is allowed." 56. In A.Y. 2010-11, on same facts learned CIT(A) has followed earlier learned CIT(A)'s order by observing as under : "The issue involved is an issue of fact, and not of law. I have carefully considered the stand of the Assessing Officer and the submission of the A/R is whether the expenditure incurred by way of commission paid to M/s Khadlaj Perfumes LLC, UAE of Rs. 9,81,01,411/- was incurred wholly and e....
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....Supra) it will be difficult to sustain the disallowance of Rs. 9,11,53,873/- made by the A.O and accordingly the same is deleted." 58. For A.Y. 2012-13, the same learned CIT(A) has followed his earlier year order. 59. Against the above orders the Revenue is in appeal before us. 60. Facts in these cases and that the order of the Assessing Officer and learned CIT(A) and submissions by the parties are identical to the one dealt with by us in ITA No. 3060/Mum/2014 hereinabove. Our above adjudication applies mutatis mutandis for this appeal also. Accordingly, we uphold the order of learned CIT(A) on this issue. 61. One more issue raised by the Revenue in A.Y. 2011-12 in ITA No. 198/Mum/2018 is learned CIT(A) erred in deleting the addition of Rs. 47,904/- by treating the unexplained purchases as genuine without appreciating the fact that the assessee has not proved the genuineness of the said transactions. 62. On this issue Assessing Officer noted that he has noticed that the assessee has indulged in obtaining bogus accommodation entry from N.B. Enterprises to the tune of Rs. 46,965/-. The Assessing Officer did not specify as to what was the nature and from where the accommodation e....