INTERPLEX INDIA PVT. LTD.,MUMBAI vs. D.C.I.T. CIR. 3(2), MUMBAI

M/s. Interplex India P.Ltd. Assessment Year :2010-11 manufacturers of cellulose acetate sheets (plasticized) IG Grade granules, PET sheets, sun strap etc. 2.1 The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-Circle-3(2), Mumbai [AO] in scrutiny assessment u/s.143(3) of the Act on 24/12/2012 wherein the assessee was saddled with impugned disallowance of Rs.13.98 Lacs, being excessive commission paid by the assessee to an entity namely M/s. Jayson International [Jayson]. 2.2 During assessment proceedings, it transpired that assessee paid certain commission to the following parties: - No. Name of Party Commission Paid Rate of (Rs.) Commission (Rs./Per Kg) 1. Jayson International 16,70,221/- 7.50 per Kg / 10.00 per Kg 2. Samara Udhyog 4,60,539/- 1.5 per Kg The same led the Ld. AO to form a belief that commission was paid at excessive rate to M/s. Jayson International. Although the assessee defended the difference in rates vide reply dated 05/12/2012, inter-alia, by submitting that M/s Jayson International was associated with the assessee for about 15 years and created customer base of about 70 companies scattered all over North including smaller towns in Punjab whereas M/s Samara Udhyog was appointed to service 2-3 customers in Nashik region. It was also submitted that Jayson was responsible for timely collection of payment and was required to remit the same twice in every month irrespective of fact whether the actual payment was received from the customer or not in contrast to Samara who would remit amount only once in a month and that too, after realizing the same from M/s. Interplex India P.Ltd. Assessment Year :2010-11 the customers. Another distinguishing factor adduced was that customers handled by Jayson were scattered and their order sized varied considerably. Lastly the per Kg realization by Jayson was stated to be higher by more than Rs.19/- per kg in comparison to Samara. However, Ld. AO, noticing that the sales quantity of 3.07 Lac Kg achieved by Samara far exceeded the sales quantity of 1.81 Lac Kg achieved by Jayson and therefore, there was no justification for higher commission payment. It was also observed that the facts that Jayson was catering to larger area or the sales realization per Kg. were higher has not been supported with any comparative data /evidences. Finally, not convinced, the allowable commission payment was restricted to Rs.1.50 per Kg and the differential amount i.e. Rs.13.98 Lacs was disallowed and added to the income of the assessee. The stand of Ld. AO, upon confirmation by Ld. first appellate authority, is under appeal before us.

The Ld. Authorized Representative for Assessee [AR], Shri Kuldeep Mehta, drawing our attention to the documents on record, submitted that similar commission was paid by the assessee in preceding years and the same has been accepted by the revenue. It has been submitted that Jayson was associated with the assessee for more than 15 years and the commission was being paid pursuant to written agreement entered into by the assessee with Jayson. The Ld. AR also drew our attention to the factors that justifies payment of commission at higher rate. An application for admission of additional evidences u/r 29 of the Income Tax Rules, 1962 has also been put forward to submit that Jayson’s sales realization per Kg were much higher than that of Samara.

Upon careful consideration, we find that basic facts are not in dispute. The only dispute is with regard to higher rate of commission paid by the assessee to Jayson. It is also undisputed fact that Jayson was associated with assessee for more than 15 years and was being paid commission at certain rate regularly. The genuineness of the same is not under doubt since the Ld. AO himself, has allowed the same to the extent of Rs.1.50 per Kg. One of the major factors which led the Ld. AO to make the said disallowance was the fact that the assessee failed to demonstrate that the Jayson’s sales realization was much higher than that of Samara. To rebut the same, the assessee has placed on record additional evidences which, if found tenable, would dispel the apprehension raised by Ld. AO. Therefore, we remit the issue back to the file of Ld. AO to appreciate the additional evidences as placed on record and re-adjudicate the same after affording reasonable opportunity of being heard to the assessee, who, in turn, is directed to substantiate his stand, in this regard.

Resultantly, the appeal stands allowed for statistical purposes. Order pronounced in the open court on 18th March, 2019.