(PER : HONOURABLE MS JUSTICE SONIA GOKANI) Challenging the Order of the Income Tax Appellate Tribunal, Ahmedabad [ Tribunal for short] dated 31st March 2012, this Tax Appeal is preferred raising following substantial questions of law for our consideration :-
Whether the ITAT was justified in law in deleting the disallowance of Rs. 1,09,16,495/= made on account of export commission which was confirmed by the Assessing Officer and the CIT [A], without appreciating the fact that the entire transaction is sham in nature as there is not an iota of evidence regarding the services rendered by the agents ?
We have heard learned counsel Shri K.M Parikh for the Revenue and Shri Deepak Shah for the respondent-assessee. In the instant case, for the A.Y 2006-07, the assessee had debited commission expenses of Rs. 1,09,16,395/= in respect of exports to Bangladesh. This was disallowed by the Assessing Officer on the ground that there was no evidence adduced for substantiating the claim.
Aggrieved by the same, when approached CIT [A], it concurred with the Assessing Officer and also gave elaborate findings to conclude that the said claim was disallowable. CIT [A] was of the opinion that no evidence worth the name regarding services rendered by the agents had been adduced. It was also of the opinion that only on the confirmation given by the agents, nothing proves in connection with rendering of services and these were merely a bald confirmations. The assessee, when approached the Tribunal, it allowed the claim of the assessee setting aside the orders of both the authorities below. Therefore, the present petition.
It is fervently urged by learned counsel Shri Parikh that the claim made for payment of the commission is much on the higher side and that it vindicates the hollowness of the claim. He further urged that both the authorities have rightly held by giving elaborate reasons as to why such claim could not have been entertained. He urged therefore that perversity in the findings of the Tribunal gives rise to the substantial questions of law, and therefore, this Court should interfere.
Per contra, learned counsel Shri Shah has submitted that the Tribunal has given sufficiently palatable reasons based on the record available with it. No question of law arises.
Upon thus hearing both the sides and on examining the orders of all the three authorities and the material on record with the assistance of the learned counsel appearing for the respective sides, we are of the opinion that this Tax Appeal deserves no consideration on merit, for the following reasons :-
As could be noted from the order of the Tribunal that the assessee had made export worth Rs. 268.23 lakhs to Bangladesh on account of sale of BRFL machines and also exported spares worth Rs. 81.58 lakhs. The total export turnover was Rs. 391.76 lakhs. The commission claimed was Rs. 1,09,16,495/=. Mainly on two grounds, both Assessing Officer and CIT [A] have objected to allowance of such commission amount. Firstly, for want of requisite substantiating material to prove the payment of such amount; and secondly, non supply of basis for disbursement of amount of commission of the single order amongst different agents.
As could be noted from the order of the Tribunal, there are correspondence of the assessee-respondent with the main agent viz., M/s. Marfatia & Company for the entire period between July 2004 to June 2005 detailing the contacts it had in Bangladesh and some of the agents having good contacts in respect of the work contract for underground mining contract to a Korean company. It was also intimated to the assessee-respondent that the main agent was unable to handle the entire working at Bangladesh, and therefore, it needed help of local agents. The Tribunal was convinced that not only there was sufficient correspondence, but, there was also reasonably well-explained material on record to hold that the commission expenses were already incurred and instead of making payment to only one commission agent, the same was distributed to three different agents. There was not an iota of doubt with regard to handling of the entire project by all these persons cumulatively.
We find no reason to interfere with the order of the Tribunal. As could be noted from the record, there were various tasks needed to be performed for executing the work assigned to the main commission agent at Bangladesh. Certain special efforts were needed to be made by the agent, who had express his limitation to handle it all by itself. Right from finding the buyers to procuring the sale orders; installing the machinery; obtaining payments, etc, main agent needed the support locally. He chooses to distribute his commission amongst others either by paying himself on by requesting the assessee to do so directly. As correctly held by the Tribunal, this would have no bearing on allowability of such sum when execution of contract was not found doubtful.
Again, the commission paid to the main agent also cannot be said to be so high as compared to the total worth of contract required to be executed. Thus, when there was sufficient evidence adduced by the assessee-respondent in respect of genuineness of the payment of such amount, the Tribunal has rightly set-aside the order of both the authorities below and allowed the commission expenditure in question. No error much less any perversity is found in the reasoning rendered by the Tribunal, who based its sound findings on well recognized principles of interpretation of evidence. Resultantly, we find no substantial question of law in this Tax Appeal. Tax Appeal is, therefore, dismissed.
(AKIL KURESHI, J.) (Ms. SONIA GOKANI, J.) Prakash* Page 5 of 5