TECH PACIFIC INDIA LTD ( NOW KNOWN AS INGRAM MICRO INDIA LTD),MUMBAI vs. DCIT OSD -II CEN RG 7, MUMBAI

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 1 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI M.BALAGANESH (ACCOUNT MEMBER ) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA Nos.8794, 8795 & 8797/MUM/2011 (Assessment Years: 2005-06, 2006-07 & 2008-09) Tech Pacific India Limited Dy. Commissioner of (Now known as Ingram Vs. Income-Tax, OSD II, Micro India Ltd.) Central Range -7, Gate No. 1A, Godrej Aayakar Bhavan, Industries Complex, M.K. Road, Pirojshanagar, Vikroli Mumbai – 400 020 (East) Mumbai – 400 079 PAN No. AABCT1296R (Assessee ) (Revenue)

Assessee by : Shri J.D. Mistry & Ms. Jasmine Amalsadwala, A.Rs Revenue by : Shri V. Sreekar , D.R Date of Hearing : 09/03/2021 Date of pronouncement : 07/06/2021

ORDER PER RAVISH SOOD, J.M: The captioned appeals filed by the assessee are directed against the respective orders passed by the A.O under Sec. 143(3)/153A r.w.s 144C(13) of the Act, 1961 (for short „Act‟) for A.Y. 2005-06, A.Y. 2006-07 and A.Y. 2008-09. As certain common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by a common order. We shall first take up the appeal for A.Y 2005-06. The assessee has assailed the impugned order on the following grounds of appeal before us:

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 2 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 “1) The Assessing Officer and the learned DRP erred in disallowing depreciation amounting to Rs.14,93,072/-, claimed on the block of intangible assets consisting of goodwill. Having regard to the facts and circumstances of the case and the provisions of law, the Appellant submits that the depreciation on such block of asset be allowed as claimed by the Appellant in its Return of Income. 2) The Assessing Officer and the learned DRP erred in making an adhoc disallowance of 5% of the total staff welfare expenses, aggregating to Rs.2,45,259/-, incurred by the Appellant. Having regard to the facts and circumstances of the case, the Appellant submits that the disallowance is unwarranted and requires to be deleted. 3) The Assessing Officer and the learned DRP erred in disallowing commission payments, aggregating to Rs.1,09,93,307/- on the ground that confirmations had not been filed by the Appellant before the Assessing Officer and that the confirmations filed before the DRP were not relevant or material. Having regard to the facts and circumstances of the case, the Appellant submits that the commission paid be allowed as a deduction as claimed by the Appellant in its Return of Income. 4) The Assessing Officer erred in observing that the process of amalgamation of the Appellant Company with Ingram Micro India Private Ltd. was not completed and in holding that the Appellant Company had not filed its returns of income for Assessment Year 2006-07 onwards. 5) The Assessing Officer erred in not granting credit for tax deducted at source aggregating to Rs.24,66,754/-, without assigning any reasons for the non-grant of such credit. 6) The Assessing Officer erred in not granting credit for Self Assessment tax paid by the Appellant aggregating to Rs.1,50,47,560/-, without assigning any reasons for the non-grant of such credit. 7) The Appellant submits that the Assessing Officer erred in calculating interest under Section 234A(3) of the Act. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to recalculate the said interest. 8) The Appellant submits that the Assessing Officer erred in levying interest under Section 234B of the Act when no such interest was leviable. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to delete the said interest. 9) The Appellant submits that the Assessing Officer erred in levying interest under Section 234D of the Act when no such interest was leviable. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to delete the said interest. 10. the appellant objects to the action of the Assessing Officer in initiating penalty proceedings under Sec. 271(1)(c) of the Act..”

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 3 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 2. Briefly stated, the assessee company viz. M/s Tech Pacific India Ltd. (hereinafter referred to as TPIL) is engaged in trading of computer software and computer peripherals both domestically and abroad. TPIL has a wholly owned subsidiary at Singapore under the name and style of M/s Tech Pacific India Exports Pte Ltd. (hereinafter referred to as TPIEPL). In the month of November, 2004 Ingram Micro Inc., a U.S based company (hereinafter referred to as IMIL) had acquired shares in M/s Tech Pacific Group, pursuant whereto TPIEL came to be known as M/s Ingram Micro India Exports Pte. Ltd. (hereinafter referred to as IMIEPL). Thus, IMIL/TPIL has a fully owned subsidiary at Singapore in the name and style of IMIEPL.

Sr. No. Particulars Amount 1. Depreciation on goodwill Rs.14,93,072/- 2. Disallowance of staff/other welfare expenses Rs.4,90,518/- 3. Disallowance of commission payment Rs.1,09,93,307/-

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 4 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 ad hoc disallowance of 10% of the staff welfare expenses of Rs.4,90,518/- proposed by the A.O the DRP restricted the same to 5% i.e to the extent of Rs.2,45,259/-.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 5 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 dealers located all over India and obtain the confirmations as were required by the A.O. It is claimed by the assessee that despite its aforesaid efforts only a few confirmations could be obtained by December 31, 2010 i.e the latest by which the draft assessment order was to be passed. It was thus submitted by the assessee that for the aforesaid reason the remaining confirmations could not be filed with the A.O. It is stated by the assessee that as after culmination of the assessment proceedings it was able to obtain some more confirmations from its dealers, the same, thus, were filed with the DRP. However, the DRP declined to take cognizance of the aforesaid confirmations for the reason that as those were not filed in the course of the assessment proceedings, the A.O, thus was precluded from verifying the same. Also, the DRP was of the view that the confirmations furnished by the assessee company were not relevant as they did not have any contemporaneous evidentiary value. It is stated by the assessee that after culmination of the proceedings before the DRP it was able to obtain certain more confirmations from the dealers to whom commission was paid during the year under consideration. Accordingly, the assessee explaining the reasons as to why the confirmations which have been filed before us as additional evidence could not be furnished before the A.O, had thus, requested that the same be admitted as they have a material bearing on the adjudication of the issue in question.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 6 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 9. Depreciation on Goodwil :

As is discernible from the orders of the lower authorities, the assessee had raised a claim for depreciation on goodwill of Rs.14,93,072/-. However, the A.O following the view that was arrived at by his predecessor while framing assessment in the case of the assessee for A.Y. 2002-03 to A.Y. 2004-05, rejected the aforesaid claim of the assessee. Accordingly, the A.O holding a conviction that goodwill was not a depreciable asset eligible for depreciation rejected the assessee‟s claim during the year in question. On objection filed by the assessee the DRP upheld the view taken by the A.O.

10 Before us the ld. Authorized Representative (for short „A.R‟) for the assessee submitted that the issue pertaining to the assessee‟s entitlement for depreciation on goodwill was squarely covered by the judgment of the Hon’ble Supreme Court in CIT Vs. Smifs Securities Ltd. (2012) 348 ITR 302 (SC). Also, reliance was placed on the order of the ITAT, Lucknow in the case of JCIT Vs. J.K. Cement Ltd., ITA No. 15/LKW/2018 (Lucknow).

12 We have heard the authorized representatives for both the parties in context of the aforesaid issue, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. A.R and find substantial force in the claim of the assessee. As observed by the Hon’ble Supreme Court in the case of CIT, Kolkata Vs. Smifs Securities Limited (2012) 348 ITR 302(S.C) „goodwill‟ is an asset under „Explanation 3(b)‟ to Sec. 32(1) of the Act. It was observed by the Hon‟ble Apex Court, that a reading of the words „any other business or commercial rights of similar nature‟ in clause (b) of „Explanation 3‟ indicates that „goodwill‟ would fall under the expression „any other business or commercial right of a similar nature‟. It was observed by the Hon‟ble Court that the principle of ejusdem generis would strictly apply

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 7 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 while interpreting the aforesaid expression which finds place in „Explanation 3(b)‟ to Sec. 32(1) of the Act. In the case before the Hon‟ble Apex Court, pursuant to the scheme of amalgamation of M/s YSN Shares and Securities (P) Ltd. with M/s Smifs Securities Ltd. which was duly sanctioned by the Hon‟ble High Courts of Bombay and Calcutta with retrospective affect from 01.04.1998, the assets and liabilities of M/s YSN Shares & Securities Pvt. Ltd. were transferred to and stood vested with M/s Smifs Securities Ltd. In the process „goodwill‟ had arisen in the books of M/s Smifs Securities Ltd. It was the claim of the assessee that the excess consideration paid over the value of net assets acquired of M/s YSN Shares & Securities (P) Ltd [amalgamating company] should be considered as „goodwill‟ arising on amalgamation. Infact, it was the claim of the assessee that the extra consideration was paid towards the reputation which the amalgamating company i.e. M/s YSN Shares & Securities Pvt. Ltd. was enjoying in order to retain its existing clientele. However, the A.O declined the assessee claim for deprecation for two fold reasons viz (i) that, the „goodwill‟ as per him was not an asset falling under „Explanation 3‟ to Sec. 32(1) of the Act; and (ii) that, no amount was actually paid by the assessee on account of „goodwill‟. As observed by us hereinabove, the Hon‟ble Apex Court had negated the first observation of the A.O and had held that „goodwill‟ is an asset under „Explanation 3(b)‟ to Sec. 32(1) of the Act. As regards the second observation of the A.O, the Hon‟ble Apex Court did not find any infirmity with the view taken by the lower authorities, which had approved the claim of the assessee that the difference between the cost of the assets and the amount paid constituted „goodwill‟ which the assessee company had acquired in the process of amalgamation. In sum and substance, the Hon‟ble Apex Court had approved the assesses claim for depreciation on „goodwill‟. Also, the Hon‟ble Apex Court had not found any infirmity with the view taken by the lower authorities that the excess consideration paid by the assessee over and above the value of net assets acquired of the amalgamating company i.e. M/s YSN Shares & Securities Pvt. Ltd. was to be considered as the value of „goodwill‟ arising on amalgamation.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 8 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 We find that the assessee‟s claim of depreciation on „goodwill‟ in the case before us falls within the four corners of the judgement of the Hon’ble Supreme Court in the case of CIT, Kolkata Vs. Smifs Securities Limited (2012) 348 ITR 302(S.C). We, thus, in the backdrop of the aforesaid judgment of the Hon‟ble Supreme Court in the case of Smifs Securities ltd. (Supra) are unable to concur with the view taken by the lower authorities that goodwill is not a depreciable asset eligible for depreciation, and accordingly, vacate the same. Resultantly, the disallowance of the assessee‟s claim for depreciation on goodwill of Rs.14,93,072/- is vacated. The Ground of appeal No. 1 is allowed in terms of our aforesaid observations.

We shall now advert to the grievance of the assessee that the A.O/DRP had erred in disallowing 5% of the staff welfare expenses. Observing that the assessee had neither furnished the full details of the expenses booked under the head staff welfare expenses nor supported the same on the basis of supporting documentary evidence, the A.O, thus, holding a conviction that the aforesaid claim for deduction was not fully verifiable disallowed on an ad hoc basis 10% of the said expenses amounting to Rs.21,90,518/-. On objection filed by the assessee, the DRP observed that a similar disallowance that was made in the case of the assessee for A.Ys. 2002-03, 2003-04 and 2004-05 i.e @ 10% of the staff welfare expenses was on appeal restricted to 5% by the CIT(A), vide his orders dated 05.01.2011 and 26.08.2011. Accordingly, the DRP following the view taken by the CIT(A) in the assessee‟s own case for the preceding years directed the A.O to reduce the disallowance to 5%. Resultantly, the disallowance of staff welfare expenses was restricted by the A.O to an amount of Rs.2,45,259/-.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 9 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 ITA No. 8793/Mum/2011. Taking us through the aforesaid order, it was submitted by the ld. A.R that the Tribunal had observed that as there was no whisper in the order of the A.O as to how the assessee in the course of the assessment proceedings had failed to comply with his direction to place on record any specific documentary evidence in support of his claim for deduction of the staff welfare expenses, thus, the disallowance of 5% of the said expenses could not be sustained and were liable to be vacated. Our attention was drawn by the ld. A.R to the observations of the Tribunal in its aforesaid order which reads as under :

“19. We have perused the order passed by the A.O, and find, that he had proposed the aforesaid disallowance of staff welfare expenses, for the reason, that the assessee had failed to place on record supporting documentary evidence to substantiate the veracity of his aforesaid claim of expenditure. However, we find that there is no whisper in the order of the A.O that the assessee in the course of the assessment proceedings had failed to comply with his directions to place on record any specific documentary evidence in support of his aforesaid claim of expenditure. Apart there from, the details of the expenses whose genuineness were being doubted by the A.O is also not discernible from the assessment order. In our considered view, the disallowance that was proposed by the A.O in his draft assessment order passed Sec. 153A/143(3) r.w.s 144C(1), dated 30.12.2010 is also not supported by any cogent reasoning which could persuade us to accept the same. In case, the A.O was not satisfied with the veracity of the aforesaid expenses, then he remained under a statutory obligation to have called upon the assessee to place on record the necessary supporting documentary evidence, which we find was never done by him. Apart there from, we find that the A.O has not even pointed out the details of the expenses which the assessee had failed to furnish with him. Further, the DRP loosing sight of the fact that the aforesaid adhoc disallowance of expense proposed by the A.O was not backed by any logical reasoning, had however, straightway transposed the view taken by the CIT(A) in the assesses own case for the preceding years and, restricted the disallowance to 5% of the total staff welfare expenses. Be that as it may, as the aforesaid disallowance made by the A.O/DRP falls short of a reasoned order, therefore, we are unable to persuade ourselves to accept the same. Accordingly, as the disallowance of 5% of the staff welfare expenses made by the A.O/DRP is devoid and bereft of any basis, therefore, the same cannot be sustained an dis vacated. The Ground of appeal No. 1 is allowed.” We have given a thoughtful consideration to the aforesaid issue, and find, that the facts and the issue pertaining to the disallowance of the assessee‟s claim for deduction of staff welfare expenses remains the same as were there before us in the aforementioned appeal of the assessee in ITA No. 8793/Mum /2011. Admittedly, in the present case also, the A.O while resorting to an ad hoc disallowance out of the staff welfare expenses had not called upon the assessee to furnish the details in respect of the staff welfare expenses which as per him were not verifiable. As such, the assessee had suffered the aforesaid part disallowance of staff welfare expenses without being afforded a

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 10 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 sufficient opportunity of being heard. We, thus, in terms of our aforesaid observations are of the considered view that the ad hoc/estimated disallowance of the staff welfare expenses made by the A.O/DRP cannot be sustained and is liable to be vacated. The Ground of appeal No. 2 is allowed in terms of our aforesaid observations.

We shall now deal with the grievance of the assessee that the A.O/DRP had erred in disallowing the assessee‟s claim for commission expenses of Rs.1,09,93,307/-, for the reason, that confirmations of the parties to whom commission was claimed to have been paid by the assessee were not filed in the course of the assessment proceedings. Also, the assessee has assailed the refusal by the DRP to take cognizance of the confirmation of parties which were filed by the assessee in the course of the proceedings before the panel. As is discernible from the assessment order, we find that the assessee had debited commission expenses of Rs.1,09,93,307/- in its profit and loss account for the year under consideration. During the course of the assessment proceedings the assessee was called upon to furnish the names and addresses of the concerns to whom commission was paid; nature of the services that were rendered by the said parties and; the respective confirmations of the said parties. However, the assessee in compliance to the aforesaid directions of the A.O, vide its letter dated 07.12.2010 only furnished the names, addresses and the amount of commission paid to the respective parties. It was observed by the A.O that the assessee had failed to furnish the complete details as regards the parties to whom commission was stated to have been paid by the assessee, viz. confirmations of the parties; PAN Numbers of the a parties; and the nature of services rendered by the parties and the quantum of business procured by them. It was further observed by the A.O that the assessee had neither placed on record any written agreement executed with the aforementioned parties nor the basis of the payments made to them. Observing, that the assessee had failed to furnish the aforesaid

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 11 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 requisite details, the A.O being of the view that the assessee had failed to substantiate the identity of the persons to whom the commission was claimed to have been paid as well the nature of services which were rendered by them, thus, vide his draft assessment order proposed to disallow its claim for deduction of commission expenditure of Rs.1,09,92,307/-. On objections filed by the assessee, the DRP did not find any infirmity in the view taken by the A.O and rejected the objection filed by the assessee. The DRP while concluding as hereinabove observed that in the earlier years too the disallowance of commission expenses was upheld by the CIT(A), on the ground, that the assessee had failed to furnish the confirmations of the parties to whom commission was claimed to have been paid. The assessee in the course of the proceedings before the DRP had filed by way of additional evidence confirmations of some of the parties which it was able to procure after the culmination of the assessment proceedings. Observing, that the aforesaid confirmations were filed by the assesee for the first time in the course of the proceedings before the panel in the month of September, 2011, thereby precluding the A.O from verifying the genuineness of its claim of expenditure, the DRP declined to take cognizance of the same. Accordingly, the DRP was of the view that as the assessee had failed to substantiate its claim of commission expenditure on the basis of details/material as was called for by the A.O, thus, it upheld the disallowance that was made by the A.O and rejected the objection of the assessee. Insofar the confirmations which were filed by the assessee in the course of the proceedings before the DRP, the same were held by the panel to be not relevant and material as the same did not have any contemporaneous evidentiary value. Backed by the aforesaid directions of the DRP, the A.O vide his order passed under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011 disallowed the commission expenses of Rs.1,09,93,307/- that was claimed by the assessee.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 12 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 squarely covered by the order of the Tribunal in the assessee‟s own case for A.Y. 2005-06 in ITA No. 8793/Mum/2011, dated 19.06.2019. It was submitted by the ld. A.R that involving identical facts the A.O had in the aforesaid case disallowed the assessee‟s claim for commission expenditure of Rs.1,62,05,703/-, which after exhaustive deliberations was vacated by the Tribunal. It was, thus, the claim of the ld. A.R that as the facts and the issue pertaining to the disallowance of the commission expenditure for the year in question remained the same as were there in the aforementioned appeal of the assessee, viz. ITA No. 8793/Mum/2011, dated 19.06.2019, therefore, no part of the disallowance during the year under consideration could be sustained. Adverting to the facts involved in the year in question, it was submitted by the ld. A.R that the assessee in order to substantiate its claim of commission expenses had vide its letter dated December 7, 2010 filed with the A.O details of party wise commission expenses wheresoever the same exceeded Rs.1 lac per party during the year under consideration. The ld. A.R. took us through the details of the commission expenses which were filed in the course of the assessment proceedings, Page 6-7 of the assessee‟s paper book (for short “APB”). It was submitted by the ld. A.R that PAN numbers of the parties to whom commission in excess of Rs.1 lac was paid formed part of the details that were filed by the assessee vide its letter dated December 7, 2010. It was further submitted by the ld. A.R that confirmations of two main parties i.e M/s Omega Systems and M/s Micro Care Computer Pvt. Ltd. to whom commission aggregating to Rs.49,87,539/- was paid were filed in the course of the assessment proceedings, Page 8-10 of APB. Ld. A.R drew our attention to the „written submissions‟ that were filed with the DRP, wherein it was brought to the notice of the panel that the assessee in compliance to the directions of the A.O had furnished the requisite details to support its claim of commission expense, viz. names and addresses of the parties to whom commission was paid; the amount of commission paid; the amount of tax deducted at source; and nature of the services rendered by the parties. It was further submitted by the assessee that the nature of services rendered by the

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 13 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 parties were similar to those rendered by them in the previous years. It was submitted by the ld. A.R that the assessee had submitted before the A.O that it was virtually impossible to obtain confirmations from all the dealers who were spread all over India after gap of so many years specifically when with some of such dealers the assessee had severed its relations. It was submitted by the ld. A.R that as the assessee had after culmination of the assessment proceedings been able to procure confirmations from majority of the remaining parties which accounted for nearly 92% of the total commission paid by the assessee company during the year under consideration, the same, thus, was filed in the course of the proceedings before the DRP. It was submitted by the ld. A.R that though the aforesaid confirmations were filed with the DRP, however, the panel had declined to take cognizance of the same, for the reason, that they were not filed in the course of the assessment proceedings. It was further submitted by the ld. A.R that no material was found in the course of the survey proceedings conducted on the assessee from where it could remotely be inferred that the payment made by the assessee towards commission was ingenuine.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 14 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 the expenditure wholly and exclusively in the course of its business. We find that the assessee had assailed the disallowance of the aforesaid commission expenditure before the DRP on the following ground: “i. The Assessing Officer requested the assessee to furnish the names and addresses of the parties to whom commission had been paid along with the nature of services rendered and the conditions of the same. Accordingly, these details were duly furnished before the Assessing Officer by the assessee. It was also explained that the nature of the payment to these parties is similar to the earlier year and that there was no change in facts in the year under consideration. ii. No new material or evidence was found during the search/survey proceedings, showing that such payments are not genuine. ii. The impugned commission payments were made by way of overriding commission to the dealers of the assessee. iv. It was virtually impossible to obtain the confirmations after a gap of so many years from dealers spread all over India, some of whom may no longer be dealers for the assessee. v. There were no written agreements by and between the assessee company and those dealers as the commission was payable on case-to-case basis depending upon the product(s) sold and the year of operation. vi. The assessee did not want to create a situation whereby it would be legally liable to pay commission at a fixed rate irrespective of the prevailing market conditions at the time of entering into transactions. The Assessing Officer accepted the details and did not call for any further information from the assessee. vii. The tax was deducted at source while making the payments of commission. viii. The PAN details were not called for by the Assessing Officer during the assessment proceedings.” As observed by us hereinabove, it is a matter of fact borne from the records that the assessee had filed the details of the parties to whom commission exceeding an amount of Rs.1 lac was paid during the year under consideration, viz. name and addresses of the parties; amount of commission paid; details of credit note nos.; amount of TDS and; PAN Nos. of the parties, Page 6-7 of APB. On a perusal of the details, we find that the assessee had furnished the aforesaid details as regards 16 such parties to whom commission exceeding an amount of Rs. 1 lac each, aggregating to an

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 15 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 amount of Rs. 74,15,217/-, was paid during the year under consideration (out of total commission expenses of Rs. 1,09,93,307/-). Apart from that, as noticed by us hereinabove, the confirmations of two parties, viz. (i). M/s Omega Systems and; (ii). M/s Micro Care Computer Pvt. Ltd. to whom commission aggregating to Rs.49,87,539/- was paid were filed in the course of the assessment proceedings, Page 8-10 of APB. We are unable to concur with the declining on the part of the DRP to take cognizance of some of the confirmations of the parties which the assessee was able to procure after culmination of the assessment proceedings. In our considered view, as there was clearly a justifiable reason explaining the failure on the part of the assessee to furnish the confirmations in the course of the assessment proceedings, therefore, the DRP in all fairness ought to have admitted and considered those as were filed in the course of the proceedings before it. On a perusal of the records, we find that the assessee during the year in question had paid commission of Rs. 1.099 crores against its sales of Rs. 3,176.56 crores, and thus, had incurred a miniscule commission expenditure of 0.03% of its total sales. Also, the claim of the assessee that no material was found in the course of the survey proceedings from where it could remotely be inferred that the payments made by the assessee towards commission was ingenuine inspires confidence as regards the veracity of its aforesaid claim of expenditure. In our considered view, the assessee had substantially evidenced its claim of having paid commission to the various parties by placing on record the requisite details alongwith the confirmations which were filed before the lower authorities as well as before us. There is substantial force in the claim of the ld. A.R that due to substantial lapse of time it was not possible for the assessee to have procured confirmations from all the parties, specifically when with some of the parties its relations were severed. On a perusal of the records, we find that the assessee had in the course of the proceedings before the DRP elaborated at length upon the reasons and justification for payment of commission, as well as rebutted the judicial pronouncements that were relied upon by the A.O, as under:

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 16 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09

“2. Reasons For Payment of Commission The main reasons for the payment of such commission are briefly enumerated hereunder: i. Appellant has paid commission to its dealers, as an overriding commission, on account of sales made directly by the Appellant, in respect of orders procured by the dealer. Since the direct sale is made by the Appellant, the dealer is compensated for the margin loss through the payment of commission. ii. Such commission is paid mainly to build and maintain dealer goodwill and to ensure that the dealers are compensated for all sales generated though their efforts and is subject to deduction of tax at source. iii. There are therefore several reasons for the payment of such commission by the Company to its dealers, a few of which are enumerated below: a) The dealer generates sales through his business contacts at a place other than the place where the dealer conducts business. The company therefore supplies the material directly to the end customer. The dealer margin generated on such sales is paid by the company to the dealer for such sales. b) The dealer may not have a sales tax registration number or may have any other locations! disadvantage, as a consequence of which he is unable to supply the end customer in a particular territory. As a result, the company supplies the end customer directly. The commission paid in such instances would be equal to the margin that the dealer would have earned if he himself would have purchased the products from the assessee company and then sold them to the end customer. c) The order received by the dealer is higher than the credit limit allowed to the dealer. In such cases of very large orders, where there is a credit risk involved, the assessee company directly sells the material to the end customer and receives payment for the same* The margin that would have been earned by the dealer on such sale is paid to him as commission. In view of the above submissions, the Appellant Company submits that it is clearly apparent that the commission has been paid for various services rendered by the dealers to the Appellant Company. 3. Justification for payment of Commission It is respectfully submitted that the commission was paid by way of a pure business necessity and was duly supported by business exigencies. The justification for commission paid is enumerated hereunder:

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 17 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09

i. The Appellant is in the business of wholesale distribution of Information Technology products. It buys various products from manufacturers and with an extensive distribution network, distributes and sells these products across India. The Appellant is, therefore, a trader in computer hardware, software and other office appliances. These products are technology-reliant items and become outdated in virtually no time at all. Hence, the products become obsolete almost within a few months and have a very limited shelf life due to constant changes in technology and have to therefore be sold within a short span of time. ii. The Appellant is dependent on its dealers all over India to increase and sustain the sales of the Company. The services rendered by such dealers are to procure new orders for the Appellant from existing as well as new customers. Hence, the primary service for which the commission or incentive is paid to such dealers is for facilitating the business of the Appellant. iii. Such commission is paid to basically ensure that the dealers are compensated for their sales efforts and are actively involved in the selling and distribution of the Appellant Company's products. There is severe competition in this business and various competitors are ready to offer various inducements to the dealers to stock and sell competing products. Such incentives and commission payments are therefore a business necessity and custom to ensure the growth of the business. iv. The dealers are also independent third parties having no connection whatsoever with the Appellant Company or with any of the directors of the Company. Hence, the payment was made out of a pure business necessity and was not made to a group company or a related concern. v. The Appellant Company is also reliant on these dealers to act as the link between the Appellant and the customers. The dealers are responsible for procuring business from the various customers through their contacts and also for ensuring that the payments are regularly made and all documents as required by the Appellant, are duly furnished. The dealers are in feet required to handle the sales activities for the Appellant Company with such customers because of the volume of transactions and the demanding and personalized nature of services required by the customers in this line of business The dealers actively promote the sales of the Appellant and just because customers have dealt with the Appellant in earlier years does not automatically ensure that they will deal with the Appellant again. In today's world of cut-throat competition, these dealers play a vital role in ensuring that the business of the Appellant is preserved and expanded.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 18 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 vi. It is respectfully submitted that the total commission paid during the year was Rs.1,099 crores. The total sales made by the Appellant Company for the year ended March 31, 2005, aggregated to Rs.3,176.56 crores. As a percentage of the total sales, the sales commission paid is only 0.03%. In view of the above submissions, the Appellant Company submits that it is clearly apparent that the commission has been paid for various services rendered by the dealers to the Appellant Company and the amount paid is neither abnormal nor high. Reliance on Case Laws by the Assessing Officer The Assessing Officer has relied on the following decisions to conclude that various courts have held that commission payments were to be disallowed if there was no evidence of services being rendered or if there was no commercial consideration: Assam Pesticides & Agro Chemicals V. CIT - 227 ITR 846 (Gau.), (a) Ess Ess Kay Engineering Co. Pr. Ltd. -151 ITR 636 (Punj.) b) (c) Schneider Electric India Ltd vs. CIT - 304 ITR 360 (Del) The Appellant submits that in the first case referred to above, the Court has held that commission paid was liable to be disallowed primarily due to the fact that the payments were made by a Company or a firm to either its directors or partners or their close relatives, Thus, the commission payment was made to a closely related concern or to a concern of the same group. Similarly, in the case of Ess Ess Kay Engineering Co. P. Ltd., the payments were made by a company to a selling agency where the shareholders of the company and the partners of the selling agency were closely related. Similarly, in the third case, there was no evidence of my sales being procured by the agent and hence, the commission paid was disallowed. The Appellant submits that in case of the Appellant Company, all the dealers are independent unrelated, third parties and have no connection with the Appellant Company and are in no way related with the Appellant Company or the Directors. The services rendered by the dealers have been enumerated above. Thus, the basic facts on which the various courts have confirmed the disallowance of commission payments are itself absent in the case of the Appellant Company and have the ratio of such judgments cannot be applied to the facts of the Appellant Company's case. The Appellant respectfully submits that the issue of commission payments had come up before the learned CIT(A) - 40 in the case of Ingram Micro India Private Limited for the Assessment fears 2002-03 to 2004-05 and the learned CIT(A) has upheld the disallowance made by the Assessing Officer vide order dated August 26, 2011. The learned CIT(A) has confirmed the disallowance mainly on the ground that no confirmations from the parties were produced before the Assessing Officer and also before the learned CIT(A).The Appellant submits that in the present case the Appellant has been able to obtain confirmations from most of the parties and hence the claim for

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 19 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 deduction of commission expenses should be allowed, The copy of the statement giving the details of confirmations received, total amount of confirmations received, and the percentage of the amount of confirmations received to the total amount of disallowance of commission expenses alongwith such confirmations is enclosed herewith. Based thereon, it is respectfully submitted that since most of the confirmations in the present case have been obtained, the disallowance made on account of commission expenses be deleted. In view of the above submissions, the Appellant Company respectfully submits that the Commission expenses be allowed, as claimed by the Appellant Company in its Return of Income.”

We further find that as submitted by the ld. A.R, and rightly so, involving identical facts the claim for deduction of commission expenses that was disallowed by the A.O, on appeal, was vacated by the Tribunal in the assessee‟s own case, viz. Ingram Micro India Private Limited Vs. Dy. CIT, Mumbai, ITA No. 8793/Mum/2011; dated 19.06.2019. In its aforesaid order, the Tribunal while vacating the disallowance of commission expenses had observed as under :

“20. We shall now advert to the disallowance of the commission expenditure of Rs.1,62,05,703/- made by the A.O/DRP. As is discernible from the records, the assessee had during the year under consideration debited Rs.2,25,96,858/- towards commission expenditure, which comprised of viz. (i) commission paid to various parties in excess of an amount of Rs.1 lac per party: Rs. 1,62,05,703/-; and (ii) commission paid to parties below an amount of Rs.1 lac per party: Rs.62,91,155/-. In the course of the assessment proceedings, the assessee furnished details as regards the names, addresses and the amount of commission paid to various parties during the year. The A.O declined to accept the aforesaid claim of expenditure raised by the assessee for multiple reasons viz. (i) that, the assessee had failed to furnish the confirmations from the concerned parties; (ii) that, the PAN Numbers of the parties were not furnished by the assessee; (iii) that, the assessee had failed to satisfy the nature of services rendered by the parties to the assessee ; (iv) that, no details regarding quantum of business procured by the said parties was furnished by the assessee; and (v) that, no details as to whether there was any written agreement between the assessee and the aforesaid parties on the basis of which commission was paid to them was provided by the assessee. Accordingly, the A.O not being satisfied with the aforesaid claim of commission expenditure raised by the assessee proposed to disallow the same in his draft assessment order passed under Sec. 153A/143(3) r.w.s 144C(1), dated 30.12.2010. On objections filed by the assessee, the DRP observed that there was no scope to make an adhoc disallowance of the commission expenditure, as was so done by the A.O. However, at the same time, the DRP directed the assessee to furnish with the A.O the confirmations

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 20 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 from all the parties to whom commission of Rs.1 lac and above was paid during the year. In fact, the DRP on the basis of his aforesaid observations directed the A.O to disallow the commission expenditure of Rs. 1 lac and above, in respect of those parties whose confirmation was not furnished by the assessee. As the assessee was unable to furnish the confirmations of the parties to whom commission of Rs.1 lac and above, was paid, therefore, the A.O disallowed commission expenditure of Rs.1,62,05,703/-. 21. We have perused the orders of the lower authorities in context of the issue under consideration. Our indulgence has been sought by the assessee to adjudicate, as to whether, the A.O is right in law and the facts of the case in disallowing the commission expenditure of Rs.1,62,05,703/-. We find that the DRP in context of the aforesaid disallowance of commission expenditure, had observed as under :

“6.3 DRP has considered the AO’s observation and findings and the details submissions filed by the assessee. The DRP is of the view that the commission payments are incurred wholly and exclusively for the purpose of business, dictated by business needs and allowable as deduction in principle, as TDS also was made on such payments as application. The commission paid is not high in relation to the sales made during the year. The names and addresses were furnished earlier to the A.O and such details alongwith PAN of dealers where commission payments exceeded Rs.1,00,000/- is now furnished (a copy of the same is enclosed to this order of DRP). Considering the totality of facts and circumstances of the case, there is not scope to disallow the commission payments, in an ad hoc manner as was done by A.O. The assessee should now furnish confirmation from all the parties where commission paid is Rs. One lakh and above, within a week from the receipt of directions/order of DRP sue motto, Thereafter, A.O can disallow commission paid in respect of parties from whom no confirmation was furnished. In respect of commission payments below Rs. One lakh in each case there is no need to disallow claim without verification as assessee furnished all the relevant details. Hence, the disallowance as proposed by the A.O is not approved. A.O is directed to modify/restrict the disallowance as per directions given herein above.” A perusal of the aforesaid observations reveals that, the DRP was convinced that as the commission expenditure was wholly and exclusively incurred by the assessee for the purpose of its business, therefore, the same was not liable to be disallowed. However, the DRP after so concluding, had directed the assessee to file with the A.O the confirmations from the parties to whom commission of Rs. 1 lac and above was paid during the year, failing which the same was to be disallowed by the A.O. We may herein observe, that the aforesaid observations of the DRP regarding the genuineness and allowability of the commission expenditure and, conclusion therein arrived at by him are not found to be befitting. In our considered view, the satisfaction recorded by the DRP that the commission expenditure was incurred by the assessee wholly and exclusively for the purpose of its business, was sufficient for allowing the assesses claim of the said expenditure. Be that as it may, we shall advert to the sustainability of the aforesaid disallowance made by the A.O/DRP on merits. As is discernible from the order of the DRP, the assessee in order to dispel any doubt as regards the authenticity of its claim of expenditure as regards commission exceeding Rs. 1 lac that was paid by it

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 21 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 during the year, had thus, in the course of the proceedings before him furnished the name and addresses, PAN details, amount of commission paid, amount of TDS etc., pertaining to the parties to whom such commission was paid, as under :

Particulars Address Amount (Rs.) TDS A Team Computers S.K.s. Buildings, Perundurai Road, 110,124 6,178 Erod, Acme Digitek Solutions Rohit Bhawan, II Floor, 4, Sapru 124,237 6,491 Pvt. Ltd. Marg, Lucknow-226001 Axis Computech & G-28, Lajpat Nagar-II, New Deli- 165,472 9,260 Peripherals 110024 C.I. Infotech (P) Ltd. K-33A, Green Park Main, New 172,691 8,901 Delhi-110003 Cinthamani Computers 15/2A, Raja Badhar Street, T. 567,9800 31,859 Nagar, Chennai 600017 Computer Marketing & 17A Cross, 20th Main, First R 142,542 7,840 Allied Services Block, West of Chord Road, Rajajinagar, Bangalore – 560010 Computer Technologies C/O Anand Steel Centre, Ghat No. 284,172 14,604 Pvt. Ltd. 2347, Ganesh Park Opp. Talera Warehousing, Wagholi, Pune Creative Infotech Hirabhai Patel House, Opp. Post 383,128 20,030 Solutions Pvt. Ltd. Office, Patel Falia, Surat- 395 000 Dreamquest Infotech A-1, Live In Style Apts, # 12, 184,505 9,618 Pvt. ltd. Pottery, Richards Town Bangalore- 560,005 Excelict Consulting B-2, Harsh Bihar, Off Dhole Patil 177,994 9,985 Road, Aundh, Pune 411007 Exelan Networking 20, Taylors Road, Kilpauk, Chennai 1,426,135 80,006 Technologies 600010 Fourth Dimension New #9, Old# 5 Srirangam Avenue, 131,876 6,803 Technologies P. Ltd. 53, Pantheon Road, Egmore, Chennai, 600 008. Frontier Business 18/10, Cunnigham Road, `1,185,539 60,897 Systems Pvt. ltd. Banglore-560 052 Global Systems SCO-3021-22, Sector 22-D, 129,587 7,127 Chandigarh, 160024 Infonet Solutions 8E, Dhandapani Street, 2 Floor, T. 168,432 8,715 Nagar, Chennai- 600 017 Interface Connectronics 54/1, Sarder Patrappa Road, 329,798 17,242 Pvt. ltd. Bangalore 560 002 Lalani Computer 59, Janmaboomi Marg, 2 Floor, 110, 773 6,093 Systems Fort, Mumbai-400 001 Mega Trends Ltd. 102, Mahalingapuram Main Road, 162,648 8,458 Chennai- 600034 Micro World E-2/171, Arera Colony, Bhopal- 910,689 51,090 462016 Microcare Computers Flat No. 101, 104-106, First Floor, 1,812,507 100,251 Pvt. ltd. Ratna Complex, Nagarjuna Nagar, Ameerpet, Hyderabad-500 073 Omega Systems Sampat Nivas, Nr. Dongar Baba 2,018,779 111,033 Mandir, Mumbai Agra Road, At Post Vilholi, Nasik Quadra Systems 992, Diwanara Palaya, HMT Main 786,641 44,131 Road, Gokul Extension, Bangalore- 560054 Radius Systems Pvt. 245-A, I Floor, Sant Nagar, East of 170,000 8,712 Ltd. Kailash, New Delhi- 110 065 Satva Open Systems Ambika Complex-3 Floor, Arcot 981,635 54,177 Road, Kodambakkam, Chennai- 600 024 Simi Enterprises 103, B-104, Sagar Shopping 158,000 8,690 Centre, 76, J.P. Road, Andheri (W), Mumbai- 400 024 System Tech Inc., “S.T House”, D. N. Ramaiah 1,576,555 86,298 Layout, R.M. Guttahalli, Bangalore- 560 020 Targus Technologies Pvt. J-107, South Extension Part-1, 469,126 24,422

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 22 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 ltd. New Delhi- 110 049. Tayal Software Sushma Nikunj, O/S Surajpole 260, 110 14,292 Consultancy Services Udaipur- 313 001 Tricad Solutions B-3, Basement, 4/24 East Patel 237,120 13,302 Nagar, New Delhi- 110008 Trident Enterprises 31, Mg Marg, Behind Roop Laxmi 123, 515 6,794 Garments, Civil Lines, Allahabad Value Point Systems #239, R.M.V. Extension, Opp CPR I 357,863 18,537 Pvt. Ltd. Sadashi Vanagar, Bangalore- 560 080 Vidur & Co. Pvt. Ltd. 35/F2 Sanjayplace, Agra 282002 243,276 12,718 Wysetek Systems 6-7, Udyog Mandir, Off Pitambar, 142, 334 7,295 Technologists P. Ltd. Lane Mahim, Mumbai- 400 016 As can be gathered from the aforesaid information that was furnished by the assessee, we find, that the complete details of the parties to whom commission of Rs. 1 lac and above was paid during the year, along with their respective addresses, amount of commission paid and, the TDS on the said respective payments was furnished by the assessee with the A.O. At this stage, we may herein observe, that the payments made by the assessee to the abovementioned parties for the period ended 31.12.2004, pertained to a period of about 7 years ago in context of the date of passing of the assessment order by the A.O under Sec. 153A/143(3) r.w.s. 144C(13), dated 31.10.2011. Accordingly, we find force in the contention advanced by the ld. A.R, that keeping in view the aforesaid substantial time gap of 7 years, it was practically not possible on its part to have obtained the confirmations of the said parties. In our considered view, now when the assessee had furnished complete details along with income tax credentials viz. PAN Numbers of the aforesaid parties with the lower authorities, therefore, merely for the stand alone reason that the confirmations of the said parties for transactions pertaining to a period relating to 7 years ago were not filed by the assessee with the A.O, would not justify disallowance of the commission expenditure so claimed by it. Interestingly, we find that on the basis of similar details filed by the assessee in respect of the parties to whom commission below Rs. 1 lac per party, aggregating to Rs. 62,91,155/-, was paid, the claim of the assessee towards commission expenditure to the said extent was accepted by the DRP. In fact, we find that the order of the DRP allowing the assesses claim of commission expenditure of Rs. 62,91,155/- without any qualification, had been accepted by the revenue and had not been assailed any further. In our considered view, if on the basis of the same set of documentary evidence the A.O/DRP had accepted the assesses claim for commission expenditure of Rs. 62,91,155/-, then there could have been no justifiable reason for the said authorities to have adopted a different yardstick for considering the allowability of the balance commission expenditure of Rs. 1,62,05,703/-. As a matter of fact, as can be gathered from the DRP order, though the assessee had furnished with it the PAN details of the parties to whom commission of Rs. one lac and above was paid during the year, however, no such details were ever filed as regards the remaining parties. Accordingly, we are of the considered view, that keeping in view the aforesaid facts, it would not have been permissible for the lower authorities to have adopted an inconsistent approach while considering the allowability of the commission paid by the assessee to various parties. Apart there from, our view that failure on the part of an assessee to file the confirmations of parties on account of substantial time gap that had lapsed since the date of transaction entered into by the

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 23 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 assessee with them, cannot on the said stand alone basis justify drawing of adverse inferences as regards the veracity of such claim of expenditure raised by the assessee, is fortified by the judgment of the Hon’ble High Court of Calcutta in the case of Mather & Platt (India) Ltd. Vs. CIT (1987) 168 ITR 493 (Cal). In the aforementioned case, one of the ground which had weighed in the minds of the A.O while disallowing the assesses claim of commission expenditure, was that the summons issued under Sec.131 to the agents after expiry of a period of 4 years from the date when the transactions were entered by the assessee with them, were returned back by the postal authorities with the remarks „not known‟. On the basis of the aforesaid facts, it was observed by the revenue authorities that the assessee had failed to discharge the onus as regards establishing the identity of the agents to whom the commission was paid. On appeal, it was observed by the Hon‟ble High Court, that in the backdrop of the evidence placed on record by the assessee, it would be unreasonable to hold that the assessee had failed to establish the identity of the commission agents, for the reason, that the said persons were not found available at their respective addresses after an expiry of a period of 4 years from the date of the transactions under consideration. Now, in the case before us, it is an admitted factual position, as is discernible from the order of the DRP and, had not been assailed by the revenue before us viz. (i) that, the commission expenditure was incurred by the assessee wholly and exclusively for the purpose of its business, which was dictated by business needs and was allowable; (ii) that, the fact that the assessee had deducted tax at source on the aforesaid commission payments substantiated the genuineness of the said expenditure; (iii) that, the commission paid by the assessee was not high in relation to the sales made during the year; (iv) that, the names and address of the parties, to whom commission was claimed by the assessee to have been paid was furnished with the A.O and (v) that, the details along with the PAN numbers of the dealers to whom commission in excess of Rs. 1 lac was paid was furnished by the assessee in the course of the DRP proceedings, therefore, we are of the considered view, that the genuineness of the aforesaid commission expenditure and, the fact that the said expenditure was incurred wholly and exclusively for the purpose of the business of the assessee, admittedly stands established beyond any scope of doubt. Apart there from, we are also of the considered view, that now when on the basis of similar details filed by the assessee the commission expenditure of less than Rs. 1 lac per party, aggregating to Rs. 62,91,155/-, had been accepted by the A.O/DRP, therefore, a different yardstick could not have been adopted by them for verifying the veracity of the balance commission expenditure of Rs.1,62,05,703/-. On the basis of our aforesaid observations, we are of a strong conviction that now when the assessee had placed on record substantial material to substantiate the genuineness and veracity of the commission expenditure, which has already been accepted by the DRP while disposing off the objections of the assessee, therefore, there was no justifiable reason for disallowing the aforesaid commission expenditure of Rs. 1,62,05,703/-. Accordingly, we vacate the disallowance of commission expenditure of Rs, 1,62,05,703/- made by the A.O. The Ground of appeal No. 2 is allowed.”

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 24 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 In the backdrop of our aforesaid deliberations, we are of the considered view that in the totality of the facts involved in the case before us, viz. material placed on record by the assessee to substantiate the authenticity of the commission expenses; that confirmations from all the dealers could not be obtained after lapse of a substantial period of 5 years (aprox); the PAN Nos. of majority of the parties were furnished by the asssessee; commission expense of Rs. 1.099 crores incurred by the assessee against its sales of Rs. 3,176.56 crores worked out at a miniscule figure of 0.03% of its sales; the assessee had duly demonstrated before the DRP the reason and justification for incurring the commission expenditure; and allowability of a similar claim of commission expenses in the past; and respectfully following the aforesaid order of the Tribunal in the assessee‟s own case, we find no justification in disallowance of a similarly placed assessee‟s claim for deduction of commission expenses of Rs. 1,09,93,307/-. We, thus, in terms of our aforesaid observations direct the A.O to vacate the disallowance of commission expenses of Rs. 1,09,93,307/-. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 25 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 1,50,47,560/-. As the adjudication of the aforesaid issue would require verification of facts, therefore, we restore the issue to the file of the A.O. The A.O is directed to verify the aforesaid claim of the assessee and give consequential effect thereof. The Ground of appeal No. 6 is allowed for statistical purposes.

ITA No. 8794/Mum/2011 A.Y 2006-07

“This Appeal is against the Order u/s.143(3) / 153A r.w.s.144C(13) of the Act dated October 31, 2011, of the Deputy Commissioner of Income Tax, Central Range 7, OSD II, Mumbai, in pursuance of the directions of the Hon'ble Dispute Resolution Panel II, Mumbai (DRP) and relates to the Assessment Year 2006-2007. (1) The Assessing Officer and the learned DRP erred in disallowing depreciation amounting to Rs.11,19,804/-, claimed on the block of intangible assets consisting of goodwill. Having regard to the facts and circumstances of the case and the provisions of law, the Appellant

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 26 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 submits that the depreciation on such block of asset be allowed as claimed by the Appellant in its Return of Income. (2) The Assessing Officer and the learned DRP erred in making an adhoc disallowance of 5% of the total staff welfare expenses, aggregating to Rs.7,47,318/- incurred by the Appellant. Having regard to the facts and circumstances of the case, the Appellant submits that the disallowance is unwarranted and requires to be deleted. (3) The Assessing Officer and the learned DRP erred in disallowing commission payments, aggregating to Rs.11,98,82,819/- on the ground that confirmations had not been filed by the Appellant before the Assessing Officer and that the confirmations filed before the DRP were not relevant or material. Having regard to the facts and circumstances of the case, the Appellant submits that the commission paid be allowed as a deduction as claimed by the Appellant in its Return of Income. (4) The Assessing Officer and the learned DRP erred in making an adhoc disallowance of Rs.5,00,000/- out of the aggregate miscellaneous expenses incurred by the Appellant Company for the year under consideration. Having regard to the facts and circumstances of the case, the Appellant submits that such expenditure requires to be allowed as claimed by the Appellant in its Return of Income. (5) The Assessing Officer erred in observing that the process of amalgamation of the Appellant Company with Ingram Micro India Private Ltd. was not completed and in holding that the Appellant Company had not filed its returns of income for Assessment Year 2006-07 onwards. (6) The Assessing Officer erred in not granting credit for tax deducted at source aggregating to Rs.72,98,738/-, without assigning any reasons for the non-grant of such credit. (7) The Assessing Officer erred in not granting credit for self assessment tax paid by the Appellant aggregating to Rs.6,74,44,387/-, without assigning any reasons for the non-grant of such credit. (8) The Appellant submits that the Assessing Officer erred in calculating interest under Section 234A /234A(3) of the Act. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to recalculate the said interest. (9) The Appellant submits that the Assessing Officer erred in calculating interest under Section 234B of the Act. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to recalculate the said interest. (10) The appellant submits that the assessing officer erred in calculating interest under Sec. 234C of the Act. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to recalculate the staid interest. (11). The appellant objects to the action of the Assessing Officer in initiating penalty proceedings under Sec. 271(1)(c) and 271B of the Act.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 27 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09

The appellant craves leave to add to, alter or amend the above Grounds of appeal as and when advised.” 26. Draft assessment order under Sec. 153A/143(3) r.w.s 144C(1), dated 30.12.2010 was passed and the income of the assessee was proposed to be assessed at a total income at Rs.99,86,25,530/- after inter alia making the following additions/disallowances:

Sr. No. Particulars Amount 1. Depreciation on goodwill Rs. 11,19,804/- 2. Disallowance of staff/other welfare expenses Rs. 14,94,635/- 3. Disallowance of commission payment Rs.11,98,82,819/- 4. Miscellaneous expenses Rs. 12,47,700/-

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 28 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 28. After receiving the order passed by the DRP under Sec. 144C(5), dated 23.09.2011, the A.O vide his order passed under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011 assessed the income at Rs.95,22,00,185/-.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 29 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 Grounds of appeal Nos. 1 to 3 are allowed in terms of our aforesaid observations. 31. We shall now take up the grievance of the assessee that the A.O/DRP had erred in making an ad hoc disallowance of Rs. 5 lac w.r.t miscellaneous expenditure. As observed by us hereinabove, the A.O had initially disallowed an amount of miscellaneous expenses of Rs.12,47,700/- out of the total miscellaneous expenses of Rs. 3,24,50,622/- that were booked in the profit & loss account. On objections filed by the assesse, the DRP taking cognizance of the fact that the aforesaid miscellaneous expenditure inter alia comprised of an amount of income-tax penalty of Rs. 2,47,700/- that was already disallowed by the assessee in its computation of income, thus, it vacated the disallowance of the said amount. As regards the balance amount of misc. expenditure of Rs. 10 lac (out of the disallowance of Rs. 12,47,700/- made by the A.O), the DRP considering the nature of expenses restricted the disallowance on an ad hoc basis to an amount of Rs. 5 lac.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 30 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 allegation had observed that the other expenses of Rs. 10 lac were not supported by documentary evidence, thus, the same could not be allowed in toto. However, there is no mention in the assessment order as to what all expenses were not supported by documentary evidence. Nothing has been pointed out by the ld. D.R to dislodge the aforesaid factual position. On objection filed by the assessee, the DRP had wrongly observed that the disallowance was being restricted to 5% as against 10% made by the A.O, as the facts were never so. Be that as it may, the A.O in his impugned order passed u/s 153A/143(3) r.w.s 144C(1), dated 31.10.2011 though referred to the aforesaid mistake of the DRP but without pointing out as to what all expenses were not supported by documentary evidence, therein restricted the disallowance on an ad hoc basis to Rs.5 lac. As neither of the lower authorities had pointed out as to what all expenses out of total miscellaneous expenses of Rs. 3,24,50,622/- were not supported by documentary evidence, therefore, no ad hoc disallowance under such circumstances could justifiably have been made. In our considered view a disallowance of an expense made by an A.O in the thin air can by no means be sustained. We, thus, in terms of our aforesaid observations vacate the disallowance of Rs. 5 lac made by the A.O/DRP w.r.t the miscellaneous expenses. The Ground of appeal No. 4 is allowed in terms of our aforesaid observations.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 31 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 37. The assessee has assailed before us the order of the A.O on the ground that he has erred in not granting credit of Self-assessment tax of Rs. 6,74,44,387/-. As the adjudication of the aforesaid issue would require verification of facts, therefore, we restore the issue to the file of the A.O. The A.O is directed to verify the aforesaid claim of the assessee and give consequential effect thereof. The Ground of appeal No. 7 is allowed for statistical purposes.

“1. The Assessing Officer and the learned DRP erred in disallowing depreciation amounting to Rs.6,29,890/-, claimed on the block of intangible assets consisting of goodwill. Having regard to the facts and circumstances of the case and the provisions of law, the Appellant submits that the depreciation on such block of asset be allowed as claimed by the Appellant in its Return of Income.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 32 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 2. The Assessing Officer and the learned DRP erred in making an adhoc disallowance of 5% of the total staff welfare expenses, aggregating to Rs. 16,16,772/-, incurred by the Appellant. Having regard to the facts and circumstances of the case, the Appellant submits that the disallowance is unwarranted and requires to be deleted. 3. The Assessing Officer and the learned DRP erred in disallowing commission payments, aggregating to Rs.4,66,49,154/- on the ground that confirmations had not been filed by the Appellant before the Assessing Officer and that the confirmations filed before the DRP were not relevant or material. Having regard to the facts and circumstances of the case, the Appellant submits that the commission paid be allowed as a deduction as claimed by the Appellant in its Return of Income. 4. The Assessing Officer and the learned DRP erred in making an adhoc disallowance of 5% of the aggregate miscellaneous expenses, aggregating to Rs.11,78,786/-, incurred by the Appellant Company for the year under consideration. Having regard to the facts and circumstances of the case, the Appellant submits that such expenditure requires to be allowed as claimed by the Appellant in its Return of Income. 5. The Assessing Officer erred in observing that the process of amalgamation of the Appellant Company with Ingram Micro India Private Ltd. was not completed and in holding that the Appellant Company had not filed its returns of income for Assessment Year 2006-07 onwards. 6. The Assessing Officer erred in not granting credit for tax deducted at source aggregating to Rs.9,68,210/-, without assigning any reasons for the non-grant of such credit. 7. The Appellant submits that the Assessing Officer erred in levying interest under Section 234A(3) of the Act when no such interest was leviable. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to delete the said interest. 8. The Appellant submits that the Assessing Officer erred in calculating interest under Section 234C of the Act. Having regard to the facts and circumstances of the case, and the provisions of law, the Appellant submits that the Assessing Officer be directed to recalculate the said interest. 9. The Appellant objects to the action of the Assessing Officer in initiating penalty proceedings under section 271(1)(c), 271AAA and 271B of the Act. The Appellant craves leave to add to, alter or amend the above Grounds of Appeal as and when advised.”

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 33 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 assessed at a total income at Rs. 187,04,77,760/-after inter alia making the following additions/disallowances:

Sr. No. Particulars Amount 1. Depreciation on goodwill Rs. 6,29,890/- 2. Disallowance of staff/other welfare expenses Rs. 32,33,543/- 3. Disallowance of commission payment Rs. 4,66,49,154/- 4. Miscellaneous expenses Rs. 12,47,700/-

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 34 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 45. The assessee being aggrieved with the assessment order passed by the A.O under Sec. 153A/143(3) r.w.s 144C(13), dated 31.10.2011 has carried the matter in appeal before us. Before proceeding with the merits of the appeal, we may herein observe that the assessee company had vide its letter dated 05.03.2018 and 04.04.2018 sought liberty to place on record as additional evidence the confirmations of 23 parties and 15 parties, respectively, to whom commission during A.Y 2005-06, A.Y. 2006-07 and A.Y. 2007-08 is claimed to have been paid, which has been admitted by us while disposing off the assessee‟s appeal for A.Y 2005-06 in ITA No. 8795/Mum/2011. 46. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements relied upon by them to drive home their respective contentions. Both the ld. Authorized representatives submitted that the facts and the issues pertaining to the Grounds of appeal Nos. 1 to 3 remains the same as were there before us in the assessee‟s appeal for A.Y 2005-06 in ITA No. 8795/Mum/2011. As the facts and issue pertaining to assessee‟s claim for, viz. (i) depreciation on goodwill; (ii). disallowance out of staff welfare expenses; and (iii). disallowance of commission expenses remains the same as were there before us in the assessee‟s appeal for A.Y 2005-06 in ITA No. 8795/Mum/2011, therefore, our order and reasoning therein adopted shall apply mutatis mutandis for the purpose of disposal of the said issue in the present appeal of the assessee for A.Y 2006-07 in ITA No. 8794/Mum/2011. Accordingly, on the same terms the disallowances made by the A.O, viz. (i). disallowance of assessee‟s claim for depreciation on goodwill :Rs. 6,29,890/-; (ii). disallowance out of staff welfare expenses :Rs. 16,16,772/-; and (iii). disallowance of commission expenses : Rs. 4,66,49,154/- are herein vacated. The Grounds of appeal Nos. 1 to 3 are allowed in terms of our aforesaid observations.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 35 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 47. We shall now take up the grievance of the assessee that the A.O/DRP had erred in making an ad hoc disallowance @5% of total miscellaneous expenses i.e Rs.11,78,786/-. As is discernible from the assessment order passed by the A.O u/s 153A/143(3) r.w,s 144C(13), dated 31.10.2011, initially an amount of Rs. 23,57,572/- i.e 10% of the total amount of miscellaneous expenditure of Rs. 2,35,75,724/- that were booked by the assesse in its profit & loss account was disallowed. On objections filed by the assesse, the DRP taking cognizance of the fact that the aforesaid miscellaneous expenditure inter alia comprised of an amount of income-tax penalty that was already disallowed by the assessee in its computation of income, thus, vacated the said disallowance failing which the same would result to double addition in the hands of the assessee. As regards the balance amount of misc. expenditure, the DRP considering the nature of expenses restricted the disallowance on an ad hoc basis to 5% of total miscellaneous expenditure. A.O vide his order passed u/s 153A/143(3) r.w.s 144C(13), dated 31.10.2011 giving effect to the direction of the DRP worked out the disallowance out of miscellaneous expenditure at Rs. 11,78,786/- i.e @5% of total miscellaneous expenditure of Rs. 2,35,75,724/-. 48. Before us, it was submitted by the ld. A.R that no part out of the ad hoc disallowance out of the misc. expenses could be sustained. It was submitted by the ld. A.R that the lower authorities without pointing out the specific expenses which as per them was not allowable as a deduction could not have on an ad hoc basis justifiably dislodged the assessee‟s claim for deduction. In support, reliance was placed by the ld. A.R on the order of the Tribunal in the assessee‟s own case, viz. Ingram Micro India Private Limited Vs. Dy. CIT, Mumbai, ITA No. 8793/Mum/2011; dated 19.06.2019. It was, thus, submitted by the ld. A.R that in the absence of any reasoning the ad hoc disallowance of the miscellaneous expenses could not be sustained.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 36 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09 50. We have given a thoughtful consideration to the aforesaid issue and find substantial force in the claim of the assessee. On a perusal of the draft assessment order, we find that the A.O on the basis of an unsubstantiated allegation that the other expenses were not supported by documentary evidence, had observed, that the same thus could not be allowed in toto. However, there is no mention in the assessment order as to what all expenses were not supported by documentary evidence. On objection filed by the assessee the DRP had restricted the disallowance to 5% of the total expenses booked under the said head. A.O in his impugned order passed u/s 153A/143(3) r.w.s 144C(1), dated 31.10.2011 without pointing out as to what all expenses were not supported by documentary evidence, therein, restricted the disallowance on an ad hoc basis i.e @5% of total miscellaneous expense of Rs. 2,35,75,724/- and worked out the same at Rs. 11,78,786/-. As neither of the lower authorities had pointed out as to what all expenses out of total miscellaneous expenses of Rs. 2,35,75,724/- were not supported by documentary evidence, therefore, no ad hoc disallowance under such circumstances could justifiably have been made. In our considered view a disallowance of an expense made by an A.O in the thin air can by no means be sustained. We, thus, in terms of our aforesaid observations vacate the disallowance of Rs. 11,78,786/- out of miscellaneous expenses made by the A.O. The Ground of appeal No. 4 is allowed in terms of our aforesaid observations. 51. The Ground of appeal No. 5 as per the concession of the ld. A.R is dismissed as not pressed. 52. The assessee has assailed before us the order of the A.O on the ground that he has erred in not granting credit of tax deducted at source of Rs. 9,68,210/-. As the adjudication of the aforesaid issue would require verification of facts, therefore, we restore the issue to the file of the A.O. The A.O is directed to verify the aforesaid claim of the assessee and give consequential effect thereof. The Ground of appeal No. 6 is allowed for statistical purposes.

Tech Pacific India Ltd. vs. Dy. CIT, Mumbai 37 ITA Nos. 8794, 8795 & 8797/Mum/2011 A.Y(s). 2005-06, 2006-07 & 2008-09

Order pronounced in the open court on 07/06/2021

Sd/- Sd/- M. Balaganesh Ravish Sood (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai, Date: 07.06.2021 **PS: Rohit Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “C” Bench, ITAT, Mumbai 6. Guard File BY ORDER, Dy./Asst. Registrar ITAT, Mumbai