TaxTMI 
TaxTMI 
2017 (1) TMI 1783
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....to other persons. The assessee was asked by the Assessing Officer to establish the genuineness as well as reasonableness of expenditure in question. The assessee was further required to explain the services rendered against which the commission has been claimed as expenditure. The A.O., after considering the submissions of the assessee, observed that "presence of middlemen in Government transaction is not welcomed by the Government. Thus no Government Officer would dare to propagate and allow presence of middlemen. That is why the Government is following the method and practice of assigning the task to Madhya Pradesh Laghu Udyog Nigam. The Government departments constitute a purchase committee for bulk purchases and seek the services of Madhya Pradesh Laghu Udhog Nigam. Thus there is no scope for entry of any middlemen". In this view of the matter, the Assessing Officer disallowed the commission claimed to have been paid by the assessee. 4. On appeal, the learned CIT(A) allowed the claim of commission payment by the assessee with the following observations :- "I have gone through the assessment order and also seen the submission of appellant. Appellant is into the business of su....
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....illegal gratification or commission payment to Government or its representation as that is against the public policy and that is disallowable under explanation to section 37(1) of IT Act. But in present case neither there is any allegation of such payment, nor there is any proof of the same. There is no restriction on person of Ratlam working as commission agent in Indore and vice versa. It is basically a liason work and can be done by person acquainted with officers of Govt. Deptt. Depending on quantum of work, more than one commission agents could be deployed. There is also no bar on payment of commission to relatives if services are rendered by them as held in Computor Graphics Ltd. (2006) 235 ITR 84(Mad) and Microtex Separators Ltd. (2007) 293 ITR 451(Kar.). Payment of commission is made to only one related person namely Shri Rajesh Gadia who is instrumental in organising entire work of appellant company and as a result of such commission payment the turnover of appellant has substantially improved over the years as shown in table given above. After the appellant filed details of services rendered by commission agents, copy of their ledger accounts, copy of bills, deta....
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....ue, the file must be restored to the Assessing Officer and the learned CIT(A) is not justified in allowing the claim. 6. On the other hand, the learned AR objected to the submissions of the learned DR on the ground that in this case the facts are entirely different whereas in this case the assessee was never asked to prove the genuineness of expenses claimed by him but the same was disallowed as thumb rule that in case of Government supplies, no middleman is required. Moreover, in this case the assessee has paid liasoning charges to various persons in connection with the services rendered by these persons relating to contract arrangement made with State Government through MPLUN. In this case the assessee has made supplies against the annual rate system and those supplier who is qualified in financial bid and technical bid on tender system during the year the assessee was qualified to supply the goods at the rates approved by various Government departments. The department has liberty to choice to distribute the order considering the production capacity of unit, past performance of vendor and location of the vendor. All this procedure was given to the department. The assessee has to....
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.... also get support from the decision of the Hon'ble High Court in the case of CIT vs. Pure Pharma, (2005) 144 Taxman 364 (MP) in which in para 3 & 4 it was held as under :- "3, A few facts material for deciding the said appeal, in short, may be mentioned as under : The Respondent/assessee company is engaged in manufacturing and sale of pharmaceutical formulations. During the previous financial year, the assessee had paid total commission of Rs. 13,35,336/-. Out of this, a sum of Rs. 10,24,290/- was paid as commission on sales made to the Government and its agencies and a sum of Rs. 3,11,046/- was paid as commission to non- Government purchases. Since, a doubt was raised with regard to the payments made to various parties as commission, enquiry was held. It was found that all the payments have been made as commission to various parties by demand drafts, wherein the identity of each of the agents was also established. It has also been found that the commission was paid exclusively for business purposes only. 4. All these are findings of fact and no substantial question of law, as is required to be formulated for deciding the appeal, arises in the same. The Tribunal has als....