The Principal Commissioner Of Income Tax Ii vs. Shri Satish Jain

-1- HIGH COURT OF M.P: BENCH AT INDORE ITA NO.92/2017, ITA No.93/17, ITA No.94/17 & ITA No.96/17 13.04.2018 (INDORE): Ms.Veena Mandlik, learned counsel for the appellant. Learned counsel for the appellant has submitted that the issue involved in these appeals is squarely covered by the order dated 01.02.2018 passed in ITA No.231/2017, ITA No.232/17 & ITA No.233/17. The order dated 01.02.2018 reads as under:- Income Tax Appeal No.231/2017 (Principal Commissioner of Income Tax-II, Aaykar Bhawan, Indore Versus Smt. Gunvanti Nautamlal Sanghvi) Income Tax Appeal No.232/2017 (Principal Commissioner of Income Tax-II, Aaykar Bhawan, Indore Versus Smt. Gunvanti Nautamlal Sanghvi) Income Tax Appeal No.233/2017 (Principal Commissioner of Income Tax-II, Aaykar Bhawan, Indore Versus Smt. Gunvanti Nautamlal Sanghvi) Indore, Dated 01.02.2018 Ms. Veena Mandlik, learned counsel for the appellant. Heard on the question of admission. O R D E R These three appeals under Section 260-A of the Income Tax Act, 1961 (herein after referred to as "the Act") have been filed by the appellant – Department against order dated 30.06.2017 (Annexure A/3) passed by the learned Income Tax Appellate Tribunal, Indore Bench, Indore in Income Tax Appeal No.498/Indore/2016, Income Tax Appeal No.497/Indore/2016 and Income Tax -2- Appeal No.499/Indore/2016 for the assessment years 2008-09, 2009-10 and 2011-12, whereby the learned Appellate Tribunal has affirmed the findings of the learned Commissioner of Income Tax (Appeals). 2. The issue involved in these income tax appeals is whether the learned Commissioner of Income Tax (Appeals) was justified in allowing the commission expenses disallowed by the Assessing Officer. 3. Facts of the case are that the assessee filed its return of income declaring total income at Rs.42,46,450/- for Assessment Year 2008-09, Rs.75,05,690/- for Assessment Year 2009-10 and Rs.70,24,250/- for Assessment Year 2011-12. The Assessing Officer found that in Profit & Loss Account, a sum of Rs.15,75,307/- has been shown as commission paid to Madhya Pradesh Laghu Udyog Nigam Limited (MPLUN). Simultaneously, commission amounting to Rs.72,54,473/- has been debited as paid to other persons. The claim was allowed without making any inquiry. During the assessment proceedings for Assessment Year 2009- 10, the assessee failed to prove the genuineness of the payment to sister concern; hence, proceedings for Assessment Year 2008-09 were set aside under Section 263 of the Income Tax Act, 1961 by the learned Commissioner of Income Tax-II, Indore, consequently a fresh assessment was for Assessment Year 2008-09 was made, disallowing the commission payments. 4. This was challenged by the assessee by filing an appeal before the Commissioner of Income Tax (Appeals). 5. The respondent / assessee is supplying goods to Government Departments like PWD and IDA on the rate approved by the Madhya Pradesh Government through Nodal Agency of a M.P. Laghu Udyog Nigam. The stand of the Department that the business related to government supplies, no commission is required, MPLUN is merely facilitators and the actual buyers are Public Works Department and Indore Development Authority, and therefore, representatives of the assessee collects the orders from these departments and also collect due for the assessee – firm. -3- 6. The learned Commissioner, considering the fact that prior to Assessment Year 2009-10, assessments of the assessee for Assessment Year 1992-93, 2007- 08, 2008-09 were completed under Section 143 (3) of the Income Tax Act, 1961 and in those assessments similar commission was paid and allowed by the Assessing Officer. 7. Relying on a decision of Madhya Pradesh High Court in the case of Commissioner of Income Tax v. Pure Pharma reported in (2005) 144 Taxman 364 (MP), the learned ITAT dismissed the appeal filed by the revenue and upheld the order passed by the Commissioner of Income Tax (Appeals). 8. Relevant paragraphs No.7 and 8 of order dated 30.06.2017 (Annexure A/3) passed by the Income Tax Appellate Tribunal, Indore Bench, Indore in ITA No.498, 497 and 499/Indore/2016 reads, as under: - "7. On the other hand, the Ld. Counsel for the assessee supported the order of the ld. CIT (A) and submitted that the allegation of the Revenue is that the business related to Government supplies, no commission is required. However, it was submitted that the MPLUN is merely facilitators and the actual buyers are PWD and IDA and, therefore, representatives of the assessee collects the orders from these Department and also collect due for the assessee-firm. They facilitate the quantity measurement of goods supplies or work executed and complete the formality, follow up the payment and carry out various other services as described in the detailed submission before the AO as well as CIT (A) and incorporated in order of the ld. CIT (A) also. It was submitted that it was a commercial decision of the assessee not to recruit employees and avail services of representatives, which saved various fixed costs and was for a performance oriented were like various allowances of travelling, dearness allowance, P.F.E.S.I.C. liability and compliance thereof. It is submitted that the assessee has not debited any travelling expenses and same is given to agents, which justifies the payment of commission at higher rate. It was also submitted that the Government Agencies have confirmed the roles of their representatives in carrying out functions related to supply in their letters. The Ld. Counsel for the assessee further placed reliance in the case of CIT v. Pure Pharma, (2005) 144 Taxman 364 (MP) of Jurisdictional -4- High Court, wherein the requirement of Agents / Representatives in the case of business of Government supplies and payment of commission therein has been approved by the Hon'ble Jurisdictional High Court. Further, Government Agencies have confirmed the involvement of the Representatives and TDS of payment of commission was made through cheques and some of the agents have been examined by the AO u/s 131 on oath wherein they have admitted to have carry out the rendering of services and expertise in supervision work making them entitled to higher rate of commission on confirmation was filed with the agents with their tax returns, their affidavits and PAN details etc. Therefore, the genuineness of expenses as well as identity has been established. Hence, the ld. CIT (A) was correct in deleting the dis-allowances made by the AO. 8. We have considered the facts, rival submissions and perused the material available on record. On going 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, Bank account details with returns of income of agents. The AO has also examined these person on oath by summoning them under Section 131 of the Act, wherein they have categorically admitted of having received the commission and service rendered by them and justification of higher rate of commission. We also note that the question framed by the AO to various Government Department like PWD and IDA was "whether they (Government Department) required the service of commission agents for making the supplies? If yes, the names and addresses of such commission agents. Therefore, the reply to this question had to be in negative as the commission agents were appointed by the assessee and not by the Government nodal agencies. We also note that the asessee is dealing in supplies of sign board etc. which required fixing site visit measurement etc. for which commission agents have rendered the service as these agents are having experience in work and expertise of government supply. Therefore, requirement of Representatives for doing such jobs cannot be denied. Further, PWD, MP vide their letter dated 24.02.2014 placed at paper book page no.53, and reproduced by CIT (A) -5- at page 14 of his order in assessee's submission (page 2.1-3) prescribes the various formalities and services required to be landled by the assessee or representatives of the agents. Therefore, we are of the considered opinion that the ld. CIT (A) was justified in deleting the addition on account of commission payments debited to the profit and loss account. This view is also supported by the decision of the jurisdictional High Court as relied upon by the ld. Authorized Representative of the assessee, the Hon'ble High Court in the case of CIT vs. Pure Pharma, (2005) 144 Taxman 364 (MP) in para 3 and 4 held as under: - "3. A few facts material for deciding the said appeal, in short, may be mentioned as under: The Respondent / assessee company is engaged in manufacturing and sale of pharmaceutical formulations. During the previous financial year, the assessee had paid total commission of Rs.13,35,336/-. Out of this, a sum of Rs.10,24,290/- was paid as commission on sales made to the Government and its agencies and a sum of Rs.3,11,046/- was paid as commission to non- Government purchases. Since, a doubt was raised with regard to the payments made to various parties as commission, enquiry was held. It was found that all the payments have been made 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." 9. On due consideration of the aforesaid, so also the fact that in earlier assessments the same was accepted by the Assessing Officer for Assessment Years 1992-93, 2007-08 and 2008-09, we are of the view that order dated 30.06.2017 passed by the learned Income Tax Appellate Tribunal, Indore Bench, Indore is just and proper, in view of the law laid down by this Court in case of Commissioner of Income Tax v. Pure Pharma (supra). 10. No case to interfere with impugned order dated 30.06.2017 (Annexure A/3) passed by the learned Appellate Tribunal, as prayed for, is made out; nor any substantial question of law is arising in these appeals. -6- 11. Accordingly, Income Tax Appeal No.231/2017, Income Tax Appeal No.232/2017 and Income Tax Appeal No.233/2017 have no merit and are hereby dismissed. 12. IA No.19045/2017 (ITA No.232/2017) and IA No.19047/2017 (ITA No.233/2017) for dispensing with from filling certified copy of order of the learned Income Tax Appellate Tribunal with original certificate, stand disposed of. In view of the aforesaid, no case is made out to interfere with the order passed by the Income Tax Appellate Tribunal dated 03.01.2017. The appeal has no merit and is accordingly dismissed. (P.K.JAISWAL) (S.K.AWASTHI) J U D G E J U D G E hk/ Digitally signed by Hari Kumar Nair Date: 2018.04.16 10:29:53 -07'00'