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The Income Tax Officer, Ward 4(1) Hyderabad. Vs. Sri Anil Rathi Hyderabad
September, 12th 2014


                   Assessment Year 2010-2011

The Income Tax Officer,       vs.   Sri Anil Rathi
Ward 4(1)                           Hyderabad
Hyderabad.                          PAN ABMPR-3739-E
(Appellant)                         (Respondent)

                 For Revenue : Mr. Solgy Jose T Kottaram
                 For Assessee : Mr. A.V. Raghuram

              Date of Hearing : 21.08.2014
      Date of Pronouncement : 03.09.2014



            This is Revenue appeal against the order of the Ld.
CIT(A)-V, Hyderabad dated 31.12.2013 for the A.Y. 2010-2011.
The issue in this appeal is with reference to disallowance of
payment of commission of Rs.14,84,090/-.

2.          Briefly stated, assessee is an individual and is having
proprietary concern in the name of M/s. Anil Rathi Trading Co.
supplying gas stoves to domestic gas agencies. In the scrutiny
assessment, A.O. noticed that assessee has claimed commission of
the above amount payable to various agents. The reason for
disallowance was that assessee had made the entries at the end of
the year and all of them are doing business of commission for the
first time in the field of business of the assessee. A.O. was also of
the opinion that there is no need to pay any commission and
assessee has devised colourful plan to reduce the tax liability. Ld.
                                         Mr. Anil Rathi, Hyderabad

CIT(A) has considered the detailed submissions and deleted the
addition by stating as under :

   "6.1.    I have carefully considered the submissions of the
   appellant and the reasons stated by the AO in his
   assessment order for disallowing the sum of Rs.14,84,090. I
   find force in the submissions of the appellant. I am of the
   view that 'the stand of the AO that the agents have not
   rendered any service is not acceptable. In this type of trade
   where only stoves of ISI standard is to be sold, there is no
   requirement of having much knowledge about the same. They
   are domestic gas stoves and to say that one will not have
   much knowledge about the same is not correct since
   everyone is using such domestic gas stoves. With regard to
   stand of the AO that mere procuring order does not amount to
   service, I disagree. In this line of business there is nothing
   more required. I find that the appellant in the earlier
   assessment year had turnover of Rs.l,08,06,894 whereas in
   this assessment year had a turnover of Rs.4,81,60,611. As
   submitted by the AR of the appellant, being an individual
   who cannot go round places and engaged the services for
   introduction appears to be correct. It is everyone knowledge
   that a wholesaler hardly does any after sale service and
   hence the question of any further service of the agent does
   not arise. The buyer of the stove from Gas agency has to go
   the service centre of the brand purchased by him or call the
   gas agency for service. I accordingly hold that the reasons of
   the AO to this extent is not correct.

   6.2.      The other view of the AO is that the appellant has
   not opened Individual ledgers for the agents and has not
   debited the sums as and when sales took place. The AO
   therefore opined that the entry at the end of the year is
   accommodation entry. The AO further stated that this
   expenditure is not incurred. I find from the submissions and
   the assessment order that the appellant has in fact paid the
   sum and deducted tax. The persons who received them
   admitted them in their income tax returns. The appellant
   explained the reasons for debiting at the end of the year to
   be that he arrived at the amount payable after ascertaining
   the receipts for sales and the number sold. The persons who
   received themselves stated the percentage at which the
   Commission is paid. Mere entries at the end of the year does
   not vitiate the claim of the appellant. It is only one of the
   ways of accounting for the expenditure. Therefore, this stand
                                            Mr. Anil Rathi, Hyderabad

     of the AO is not correct and there is every reason to hold that
     there is commission payment.

     6.3.     The AO finally states that there is no requirement
     for payment of commission in this line of trade of Gas stoves.
     However, as stated by the appellant, the AO has not brought
     on record any comparable case to hold that sales are effected
     without payment of commission. On the other hand, the
     appellant demonstrated that there are cases. wherein
     Commission is being claimed. I am also of the view that
     without lobbying, a trade of sale of Gas stoves to gas
     agencies is not possible and such lobbying cannot be carried
     out without making payment. I therefore hold that the stand
     of the AO that there is no requirement of payment of
     commission in this line of trade also is not acceptable and
     the appellant is justified in making payment of commission.
     Therefore, I delete the addition of Rs.14,84,090 incurred
     towards commission".

3.           After considering the rival submissions, even though
Revenue has raised 10 grounds in the form of submissions, we do
not see any merit in the Revenue contentions. Ld. CIT(A) has
rightly observed that the commission payment is required to be
allowed on the facts of the case. Nothing was brought on record
except the contentions, to contradict the same or to substantiate
that the findings of the Ld. CIT(A) are perverse. In view of this,
order of the Ld. CIT(A) is confirmed and grounds of the Revenue
are rejected.

4.           In the result, appeal of the Revenue is dismissed.

       Order pronounced in the open Court on 03.09.2014.

  Sd/-                                  Sd/-
 (SAKTIJIT DEY)                        (B.RAMAKOTAIAH)

Hyderabad, Dated 03rd September, 2014

                                       Mr. Anil Rathi, Hyderabad

Copy to

1.    Income Tax Officer, Ward 4(1), 5th Floor, Aayakar
      Bhavan, Basheerbagh, Hyderabad.
2.    Mr. Anil Rathi, Prop. M/s. Anil Rathi Trading Co.
      1-4-2772/66, 2nd Venture, Kawadiguda, Hyderabad.
3.    CIT(A)-V, Hyderabad
4.    CIT-IV, Hyderabad
5.    D.R. "B" Bench, ITAT, Hyderabad.
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