TaxTMI 
TaxTMI 
2017 (8) TMI 1710
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....sales of pharmaceuticals products and around 95% sales is to government Departments. The assessee supplies goods to M. P. Laghu Udhyog Nigam (MPLUN). The assessee has debited commission expenditure of Rs. 63,82,162 and Rs. 27,57557 under the head commission on sales and MPLUN commission respectively to Profit & Loss Account. The AO was of the view that there is no scope of any middlemen for giving assignment of purchase of medicines to the State government Departments. The AO therefore, allowed commission payments to MPLUN and disallowed the entire commission payments paid to other against of Rs. 63,82,162 on the ground that middlemen is not allowed in sales and products made to government agencies, as government takes serious view of the same. The AO also observed that no explanation was offered as regards the service rendered by such commission agents. The AO noted that some State government have assigned the task of carrying out any formalities relating to purchase to government body, like MPLUN in the case of Government of MP. This aspect makes it clear even if any commission is requires to be paid it goes to coffers of a government agency only of which books of accounts are su....
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....manufacturing and sales of pharmaceuticals products, where selling is entirely based on canvassing done by selling agents. Hence, existence of selling agents is reality is such business and this is proved from the facts that all these parties are unrelated to the appellant and each one of them have confirmed to the AO that they were working as agents to the appellant The CIT (A) further observed that such commission agents are not middlemen as so far no proof has been adduced by the AO that out of such payments to agents any gratification was paid to government Departments for procuring such orders. But these commission payments were for helping to the appellant for filing various tenders , pursuing the authorities for placement of orders, helping in smooth supply of goods and recovery of monies from the government. MPLUN only doing the tendering job. But the pre tender and post tender activity can very well be done by the commission agents as held in the case of Nestor Pharmaceuticals (P.) Ltd. [2010] 33 DTR 293(Del), Bharat Medical Stores [2009] 308 ITR 373(P&H) and Voltamp Transformers Pvt. Ltd. [1981] 129 ITR 105 (Guj). This explain the role of commission agents in government c....
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....le to prove that what type of services were rendered by these agents. Therefore, the Ld. CIT (A) was not justified is allowing deduction of 50% out of total commission payments. The Ld. Sr. D.R. also relied in the case of DCIT v. Shri Nautmal & Sons I.T.A. No. 78/Ind/2013 dated 19- 07-2013 [Indore-Tribunal] wherein such exorbitant commission payments at the rate of 20% allowed by the CIT (A) was set-aside to the file of the AO by the Tribunal. The Ld. Sr. D.R. further place reliance in the case of DCIT v. Mcdowell & Co Ltd. [2007] 291 ITR 0107 (Karn) wherein disallowance of commission payments for providing service of sale of liquor to canteen stores Department of Indian Military by the assessee company was upheld on the ground that such canvassing was prohibited by the government Circular dtd. Dtd. 13th July 1992 and 24th July 1992. 6. On the other hand, the Ld. D.R. of the assessee submitted the assessee supplies goods to various government department like MPLUN, who is authorized to put orders for purchase of goods on behalf of the government of Madhya Pradesh. For the purpose of floating tenders and placing orders for which MPLUN charge the service charge @ 2.24% and further c....
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....ries Pvt. Ltd. v. ACIT , I.T.A. No. 86/Ind/2010 dtd. 28- 11-2011, CIT v. Septu India Pvt. Ltd. [2008] 305 ITR 295 (P&H) and other as per his written submissions. 7. We have considered the facts, rival submissions and perused the material available on record. Ongoing through the assessment record as well as findings of the ld. CIT(A), we find that the assessee has submitted detailed evidences like names of the agents, PAN numbers, describing services rendered by the Agents, confirming the transaction, details of the TDS made. In remand report proceedings, the AO issued notice under section 133(6) to these against who appeared before the AO and admitted of rendering services as a receipt of commission from the assessee. We also note that the MPLUN was nodal agency for supply of goods but was not charge as commission instead it was charging service charges as per agreement entered in to between the assessee and it. We also note that the assessee is dealing in supplies of pharmaceuticals products to various states like Orissa, Assam, Meghalaya which are falling in remote areas which is spread over a large geographical area. Therefore, requirement of Representatives for doing such jobs....
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....de 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 also placed reliance on a judgment of the Delhi High Court reported in CIT vs. Electric Construction Equipment Co. Ltd., [1990] 182 ITR 510, wherein the Delhi High Court dealing with identical question has already decided the matter against the present appellant-Revenue." 8. Therefore, considering the totality of the facts and respectfully following the decision of Jurisdictional High Court, we are of the view that no disallowance of commission payment is called for. Accordingly, Ground No. (i) of the appeal of the Revenue is dismissed. Further the disallowance of Rs. 31,91,080 as sustained by the Ld. CIT (A) are deleted , accordingly, Ground No. 1 and 1.1 of Cross Objection of the assessee is allowed. 9. Ground No. (ii) and (iii) of Revenue relates to deleting addition of Rs. 1,33,00,000 made under section ....
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....51/Ind/2009 dated 31.01.2011(Indore-Trib). However, the assessee submitted that said decision is not applicable in their case, as that was regarding addition of share capital while appellant's is that of receiving unsecured loans, wherein identity of all depositors are established, as they are assessed to tax and in number of cases even assessment were made under section 143 (3) in case of depositors is also filed. It was further submitted that the AO framed assessment assuming that various depositors were of Lunkad group, but none of these companies belong to Lunkad group. It was further submitted that AO's remarks that there was huge deposits in their bank account is correct but the AO had forgot to mention that all those deposits were through cheques and none of them were cash deposits. Considering these facts, the Ld. CIT (A) has held as under: 15. I have gone through the arguments of both AO as well as that of the appellant. Since all depositors have confirmed about giving such deposits, the amounts were given through account payee cheques, the depositors were all filing returns of income, proof of which is furnished and even bank statements of depositors were furnished exce....
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....he Hon`ble judges that AO sat with folded hands till the appellant exhausted all the evidence or material in his possession and then forward to merely reject the same on the presumptions. In such an eventuality, no addition can be made u/s. 68 of I. T. Act. 15.2 Following the aforesaid discussion, the addition of Rs. 1,33,00,000/- of unsecured loan from various deposits added u/s. 68 of the I.T. Act cannot be sustained while addition of such unsecured loan of Rs. 15 Lakh received from M/s. Plasia Leasing & Investment Pvt. Ltd. is confirmed because as AO reported in a table annexed to remand report, the appellant selectively avoided to file copy of bank account of this depositor, while bank a/c of all other depositors were filed. This indicate strong possibility of cash deposits in bank a/c of such depositor which shifts back the onus on the appellant in this case and put huge question mark on genuineness of such transaction, all more so when such depositor has disclosed income only Rs. 4,777/- in its return. Deposit of cash in bank account of creditor make it questionable because Income Tax Act itself has money provisions restricting cash transaction of loans , purchases and con....
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....e amounts were credited to the bank accounts of such applicants. The Ld. AR further submitted that other decisions of the Hon'ble High Court, as relied upon by the learned DR, do not apply to the present case having distinct facts and circumstances. Therefore, the first appellate order may kindly be upheld and sustained by dismissing the appeal of the revenue. The Ld. AR further relied on following decision viz: CIT v. Tania Investment Pvt. Ltd. [2011] 322 ITR 394 (Bombay), CIT v. Varinder Rawley [2014] 366 ITR 232 (P&H), CIT v. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del), ACIT v. Pravin Mittal [2016] 28 ITJ 473 (Trib-Indore), CIT v. Metachem Industries [2000] 245 ITR 160 (MP):161 CTR 444 (MP) : [2001] 116 Taxman 572 (MP), were cited and special attention was drawn in the case of CIT v. Pithampur Conzima (P) Ltd. [2000] 244 ITR 442 (MP) wherein it was held that where in appeal before the Tribunal, the assessee showed that the credits given to the assessee duly declared by the creditors in their respective returns, where upon Tribunal concluded that the investment in the hands of the assessee-firm was duly explained and no addition was called for in the hands of the as....
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.... sheet of both the companies has been signed by the assessee himself as director. From the copies of bank statements of these two companies available at pages 8 and 40 of the departmental paper book we observe that there were no cash deposits during the assessment year under consideration in these accounts. The AO himself in his remand report has not pointed out any major discrepancies. In the present case in view of the above foregoing discussion, we observe that the assessee filed all possible documents before the AO which were also submitted to the AO by the respective companies in response to notices u/s 133(6) of the Act issued during remand proceedings and thus we can safely hold that the assessee discharged its onus lay upon its shoulders to prove the identity, creditworthiness of the creditors and genuineness of the transactions. From the relevant part of the assessment order, we observe that the AO merely proceeded to make addition under section 68 of the Act keeping aside all the relevant documents, which were filed by the assessee and the alleged companies. Accordingly, we have no hesitation to hold that we are unable to see any ambiguity, perversity or any other reason ....
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....igh Court in the case of CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429. Therefore, the Ld. CIT (A) was justified in confirming the addition in the case of said creditor. We have heard the rival submissions of both the parties and perused the material available on record. We also find that Ld. CIT (A) has also confirmed the addition in the case of this company on the ground that the assessee has not able to file copy of bank account and other details. We also observe that the Ld. Sr. D.R. has contended that Hon'ble High Court of Madhya Pradesh in the case of CIT v. Rathi Finlease Ltd. [2008] 215 CTR (MP) 429 has sustained the addition under section 68 of the Act in respect of M/s. Plasia Leasing & Investment Pvt. Ltd. In para 11, the Hon'ble High Court held that in the case of Palasia Leasing & Finance Company, entry was not accepted on the ground that merely by filing the confirmation letter, the burden could not be discharged when the inquiries reveal that the company was not in existence nor any books of accounts or directors were traceable. Therefore, respectfully following the same, in and in absence of relevant details like confirmations, copy of account of this c....