BDH INDUSTRIES LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4(1)(1), MUMBAI, MUMBAI

In this appeal, the Assessee has raised the following grounds of appeal:

Coming to ground No. 2 of the grounds of appeal, which is in respect of disallowance of export commission paid by the assessee, Ld. Counsel submitted that the assessee had furnished all the details of the export commission paid and the nexus between the export sales and the necessity to pay export commission was established. Ld. Counsel for the assessee, referring to pages 32 and 33 of the paper book, submitted that the assessee had entered into MOUs with the parties for exporting the goods of the assessee through commission agents on payment of commission ranging from 5% to 10%, depending on the individual project. The MOUs entered into by the assessee with Shri S. Kumar is dated 10.04.2012, with Jagdish Araquechand from Mozambique, and with Dr. Renato Ronda are dated 05.04.2013. Ld. Counsel submitted that these MOUs were furnished before the Assessing Officer, however, the commission payment was disallowed.

Ld. Counsel for the assessee, further referring to page 24 of the paper book, relied upon the decision of the Tribunal for the assessment year 2005-06 and submitted that in an identical situation, the Tribunal in assessee’s own case deleted the disallowance of export commission paid for the export business conducted by the assessee. Ld. Counsel referring to the said decision also submitted that Jagdish Araquechand from Mozambique, to whom the commission was paid had also provided business to the assessee during the assessment year 2005-06. The assessee had paid commission to Jagdish Araquechand from Mozambique, both in the assessment year 2005-06 as well as in the current year on the export sales. Therefore, Ld. Counsel submitted that 3 there is no justification for denying the export commission paid to various parties.

On the other hand, Ld. DR strongly supported the orders of the authorities below.

We have heard the rival submissions and perused the orders of the authorities below. Insofar as the contribution to the Group Gratuity Cash Accumulation Scheme (Gratuity Trust) is concerned, in view of the approval granted by Pr. CIT, Mumbai-4, vide order dated 23.08.2021, which is post-assessment, the disallowance cannot be sustained. Thus, the Assessing Officer is directed to delete the disallowance made in respect of the contribution to the Group Gratuity Cash Accumulation Scheme (Gratuity Trust) of the assessee. Ground No. 1 of the grounds of appeal is allowed.

Coming to the commission paid on export sales, we observe that the assessee paid commission to various parties on export sales, which includes individuals as well as companies, as noted by the Assessing Officer at page 4 of the assessment order. The Assessing Officer, however, allowed the export commission paid by the assessee to the companies but disallowed similar commission paid by the assessee to individuals who were based in Mozambique and Sri Lanka on the ground that the assessee had not furnished any justification regarding the business done by the individuals. However, the assessee relied on the Memoranda of Understanding entered into with the individual parties and also on the Tribunal’s order for the assessment year 2005- 4 06, wherein the Tribunal considered the commission paid to one of the parties, namely, Jagdish Araquechand from Mozambique, and allowed the commission payment. We are of the view that the assessee had proved the business connection between the export sales and the commission paid to the individuals as per the MOUs. Further, since the issue had already been considered by the Tribunal in the assessee’s own case for the assessment year 2005-06, we hold that there is no justification for disallowing the export commission paid to the individuals. Accordingly, the Assessing Officer is directed to delete the addition/disallowance made in respect of the commission paid by the assessee on export sales.

Ground No. 3 is general in nature and does not require adjudication.

Ground No. 4 is in respect of initiation of penalty proceedings u/s 270A, and the same is premature.

In the result, the appeal of the assessee is allowed as indicated above.