TaxTMI 
TaxTMI 
2008 (11) TMI 11
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....ore the Tribunal both the assessee, as well as, Revenue had preferred appeals against the order of the Commissioner of Income Tax (Appeals) (hereinafter referred to as "CIT(A)"). Before the Tribunal the appeal filed by the assessee was numbered as ITA No. 180/Del/2000, whereas the appeal filed by the Revenue was numbered as ITA No.598/Del/2000. By the impugned judgment, the appeal of the Revenue has been dismissed and that of the assessee has been allowed in respect of issues raised in grounds 1 to 6 raised in his appeal filed before the Tribunal. In this Court the Revenue has filed two appeals being ITA No. 631/2007 and ITA No. 632/2007 against the impugned judgment. 2. In order to dispose of the two appeals following facts require to be ....
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.... Assessing Officer that for the services rendered in respect of sales made by the assessee through CIL, commission @ 15% was paid to CIL. These were classified by assessee as indirect sales. As regards sales made by the assessee directly the assessee paid service charges @ 18% to CIL for the purposes of developing the market. 3.2 The Assessing Officer after considering the explanation given by the assessee came to the conclusion that the payment of commission was unreasonable and, in particular, in the absence of proof of service rendered by CIL held it to be excessive in terms of Section 40A (2)(b) of the Act read with the explanation. However, curiously, despite this observation, the Assessing Officer allowed an expenditure on commission....
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.... to 3%. As against total service charges of Rs.8,21,621/- the CIT(A) allowed a sum of Rs.1,36,935/- and sustained disallowance of a sum of Rs.6,84,686/-. 5.1 The CIT(A) gave detailed reasons for allowing the expenditure incurred by the assessee on commission charges. These were broadly as follows:- (i) an examination of the profit and loss account and the balance sheet of the assessee revealed that, as a matter of fact, no expenditure had been incurred by the assessee on sale or product development; (ii) the entire marketing and sales of the product in issue was carried out by the consignment agent, i.e., CIL; (iii) there was a perceptible increase in the turnover in the current year when compared with preceding years; (iv) an examinat....
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....ame day as CIL, was paid commission at a lower rate of 5%, as against, that which is paid to CIL, it was explained by observing that the quality of services rendered by CIL was different. Mahendru Chemicals Pvt Ltd was required to only, book orders. CIL was a del credere agent. The assessee did not expose himself to any financial risk once the goods were despatched to the consignment agent, i.e, CIL. Under Clause XI of the consignment agreement CIL was responsible for recovering the sales proceeds. 5.2. Insofar as service charges were concerned the CIT(A) came to the conclusion that the service charges to the extent of only 3% was to be allowed in favour of CIL on the ground that it would have carried out some advertisement and publicity i....
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....ted the fact that services had been rendered by CIL to the assessee. Given the fact that the services rendered by CIL were qualitatively different from that of the other consignment agent i.e, Mahendru Chemicals Private Ltd, the commission paid by assessee @ 18% was neither excessive nor unreasonable. Similarly, with regard to the service charges, Tribunal came to the conclusion that having accepted the fact that payment of commission charges to CIL was in order then, it would be difficult to sustain disallowance of services charges to the extent of 15% on the ground that service rendered by the commission agent, in respect of, direct sale by the assessee were relatively limited as compared to sales effected through CIL. The Tribunal disagr....