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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri B. Ramakotaiah
Per Smt. P. Madhavi Devi, J.M.
This is assessee’s appeal for the A.Y 2007-08 against the order of the CIT (A)-6, Hyderabad, dated 30.11.2015. The assessee has raised the following grounds of appeal:
“1. The order of the learned CIT(A) is erroneous both on facts and in law so far as it is prejudicial to the appellant. 2. The learned CIT (A) erred in upholding the disallowance of commission payment of Rs.4,18,80,995”.
At the time of hearing, the learned DR brought to our notice that this issue had arisen in the assessee’s own case in the
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ITA No 138 of 2016 Sun Minerals Hyderabad.
earlier A.Y 2008-09 and the Tribunal has held the issue against the assessee. Copy of the said order is filed before us.
The learned Counsel for the assessee also fairly agreed that the issue is covered against the assessee by the order of the Tribunal on similar set of facts in the assessment year 2008-09.
Having regard to the rival contentions and the material on record, we find that the Tribunal in the assessee’s own case for the A.Y 2008-09 in ITA No.2117 & 2116/Hyd/2011 dated 18.05.2012 at paras 6 to 13 has held as under:
“6. We have heard both the parties and perused the material on record. It is settled law that if the assessee claimed deduction of any expenditure the burden of proof is on the assessee to establish that such expenditure was incurred wholly and exclusively for the purpose of assessee's business. In the present case it is an admitted fact that there is no written agreement between the assessee and the recipients of the 5 commission agents. Even if there is no written agreement, the assessee could claim deduction for the expenses provided if it is established with documentary and cogent evidence that such expenditure was incurred for the purpose of its business. Now in the assessee's case there is even an iota of evidence regarding render of any services to the assessee to procure business to the assessee. The assessee could not even produce any correspondence between the parties which could have served as a contemporaneous circumstantial evidence. The assessee is not able to correlate the commission payments with reference to the sale. Though the assessee made a claim that the commission agents collectively introduced the parties there is no correspondence between the commission agents. As seen from paras 6.2 and 6.3 of the CIT(A)'s order, the statements given by the assessee are contradictory in nature. The parties herein have not given any evidence about the names of persons who were recommended by them.
Being so, it cannot be presumed that the parties whom the assessee made any sales were through these parties to whom the commission has been paid. As there is no evidence whatsoever to support the claim of the assessee that these impugned recipients of the payments rendered any service for which commission has been paid when they did not even know them. Therefore, it cannot be said
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ITA No 138 of 2016 Sun Minerals Hyderabad.
that the assessee has discharged the onus to prove that the commission was paid wholly and exclusively for the purpose of assessee's business. The assessee relied on various judgements which cannot be applied to the assessee's case as these judgements are on their own facts. The question whether the assessee has established that the expenditure was incurred wholly and exclusively for the purpose of business is essentially a question of fact to be decided on merit of each case.
From the statements of the so called commission agents further inferences can be drawn that none of the commission agents is able to provide definitive list of customers, quantity of sales effected, and working of commission. In fact M/s. R K Marketing Services claims that it did not know any customers (leave alone introducing them). It states that it was only ensuring quality of ore loaded into trucks. The agents received commission only from three parties namely, M/s. Sun lnfraa. M/s. Sun Minerals and M/s. K V Minerals and no one else despite the fact that Bellary is a big centre for iron ore trading. These agents did not provide similar services to any other parties despite boasting their expertise in iron ore trading. All the agents appear to be disparate and the assessee claim, that all its customers were introduced by all these agents, does not appear to be a reliable statement. The most glaring inconsistency appears in the statement of Smt. B. Bagya Lakshmi, who states that she introduced even M/s. K V Minerals.
There was no agreement between the assessee and the commission agents and there was no document on the basis of which it could be said that the commission was due and payable. As it has been already pointed out, even the agreements do not bind the Assessing Officer from enquiring into deductibility of commission. In this case there are no agreements and also there was no evidence of any correspondence or any personal meetings between the assessee and the commission agents to suggest that there was any relationship on the basis of which the commission agents procured customers for the assessee for which they were entitled to receive commission. The understanding between the parties was an oral understanding and it was doubtful that such an oral understanding could have been arrived at without any longstanding relationship having been established between the assessee and the commission agents involving such huge amounts of money over a period of time. Further, the assessee is unable to furnish the details of customers introduced by each agent and also the exact working of commission payment made to each of the agents. Mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments.
In the absence of any credible evidence for making such payments, we are inclined to disallow the same.
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ITA No 138 of 2016 Sun Minerals Hyderabad.
Reliance is placed on the decision of the Tribunal in the case of Davinder Singh v. ACIT (104 ITD 325) (ASR), CIT vs. Calcutta Agency Ltd. (19 ITR 191) (SC), Lakshmiratan Cotton Mills Co. Ltd. vs. CIT (73 ITR 634) (SC) and L.H. Sugar Factory & Oil Mills (P) Ltd. vs. CIT (19 CTR) (SC) 185 : (1980) 125 ITR 293 (SC).
Reliance is also placed on the decision of Delhi Bench of the ITAT in the case of Roger Enterprises (P) Ltd. vs. DCIT (88 ITD 95) held as under;
"51. Examining this matter from another angle, we feel that the onus of proof that the commission paid was genuine was on the assessee. The question that further arises is as to whether the assessee has discharged the onus and if yes then how. According to the assessee he has discharged the onus by proving that the payment has been made by cheque. Not only this, the name of the person to whom the payment by cheque is made is disclosed and therefore the payment is genuine. 52. This argument so raised by the assessee sounded well at the threshold but when we examined it further we found that it cannot hold water. Merely because payment is made by cheque may in some cases persuade the authorities to hold the payment to be genuine but in this case the situation is totally reverse as the person/party to whom the payment by cheque is alleged to have been made has his own story to tell and which story is believed by us. There is a complete black out on the nature of services rendered. There is no material placed on record nor has our attention been drawn to any material which would demonstrate without doubt the nature of services rendered by these three companies. Keeping in mind these facts, we feel that the assessee has miserably failed to demonstrate the services rendered and has thus failed to discharge the onus. 53. As the assessee has failed to discharge the onus, he is not entitled to the claim of commission paid."
In the result, appeals of the assessees' are dismissed.”
Since in the A.Y before us, the payments of commission disallowed by the AO are to the very same parties as in the earlier A.Ys, we respectfully follow the decision of the Coordinate Bench of the Tribunal and the assessee’s appeal is accordingly dismissed.
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ITA No 138 of 2016 Sun Minerals Hyderabad.
In the result, assessee’s appeal is dismissed.
Order pronounced in the Open Court on 28th March, 2018.
Sd/- Sd/- (B. Ramakotaiah) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 28th March 2018. Vinodan/sps
Copy to:
1 P.R. Datla & Co. CAs, 6-3-788/A/9 Fist Floor, Durga Nagar Ameerpet, Hyderabad 500016 2 DCIT Circle 6(1) Hyderabad 3 CIT (A)-6 Hyderabad 4 Pr. CIT – 6 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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