IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SHRI SAKTIJIT DEY, JUDICAL MEMBER
ITA.No.702/Hyd/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
ORDER
PER B. RAMAKOTAIAH, A.M.
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.
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ITA.No.702/Hyd/2014
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
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ITA.No.702/Hyd/2014
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)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 03rd September, 2014
VBP/-
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ITA.No.702/Hyd/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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