VANDANA ARUN SARAWGI,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX,,

The assessee has raised the following ground of appeal:-

Though the assessee has raised several grounds of appeal but the only issue raised in the present appeal is against disallowance of commission paid by assessee at ₹ 75,18,667/-.

The learned Authorized Representative for the assessee at the outset pointed out that similar commission payments were being paid by assessee in its line of business and during the year under consideration, against turnover of ₹ 76.38 crores, commission of ₹ 75,18,667/-, which was about 10% of total turnover, was paid. He further pointed out that in earlier years and even in subsequent assessment years, commission payment has been allowed. He however, fairly pointed out that in assessment years 2008-09 and 2009-10, commission was disallowed and the Tribunal had restricted disallowance to 10% of total commission paid. In this regard, he invited our attention to the order passed by Tribunal in ITA Nos.1488/PUN/2013 & 1491/PUN/2013, relating to assessment year 2008-09, order dated 23.06.2017.

The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.

We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the assessee was engaged in the business of dealer in iron, steel pipes & pipe fittings. For the year under consideration, the assessee had declared income of ₹ 1,96,18,880/-. During the year under consideration, the assessee had paid commission of ₹ 75,18,667/- on its sales. The Assessing Officer noted that there was fall in GP ratio as compared to earlier two years and another point which was noted was that the commission was being paid to sister concern. After considering the reply of assessee in this regard that sister concern was the main player in the said field and had facilitated sales to the assessee and hence, commission paid, the Assessing Officer disallowed sum of ₹ 75,18,667/-. The CIT(A) confirmed the disallowance made by Assessing Officer, against which the assessee is in appeal before us.

We find that similar issue of allowability of commission arose before the Tribunal in assessment year 2008-09 (supra) and in the said order also commission was paid to associate of assessee in order to facilitate sales to Gajanan Traders and the Tribunal noted that out of commission paid even TDS was deducted and in the totality of the facts and circumstances, disallowance of commission was restricted to 10%. Similar ratio has been laid down in assessment year 2009-10. Following the same parity of reasoning, we direct the Assessing Officer to restrict disallowance of commission to the extent of

In the result, appeal of assessee is partly allowed.