ACIT 21(1), MUMBAI vs. ANAND ENTERPRISES, MUMBAI

The only issue in the appeal of the Revenue is in respect of deletion of addition of `70,78,937/- on account of disallowance of commission expenses made by the AO.

The brief facts of the case are that the assessee is engaged in the business of manufacturing and export of readymade garments and filed its return of income on 31.08.2012 declaring income of `1,89,26,060/-. The assessment was completed on 31.03.2015 under Section 143(3) of the Act determining the income at `2,60,04,933/-. While completing the assessment the AO disallowed commission expenses of `70,78,937/- payable to Mr. Lenny King, a non-resident agent, on the sales made to M/s. Anand Enterprises Arcadia Group of U.K. The AO disallowed this commission for the reason that the assessee failed to establish with documentary evidence that the non-resident agent rendered any service to the assessee ignoring the evidences and submission made by the assessee.

On appeal, the CIT(A) deleted the disallowance following the order of the Tribunal in assessee’s own case as well as in the case of Harrison Garments Division.

The learned counsel for the assessee before us submitted that similar issue in appeal where commission payable to Mr. Lenny King of England was disallowed in A.Y. 2008-09 right from assessment years 2005-06 to 2011-12 and the Coordinate Bench deleted the disallowance considering the submissions and evidences furnished by the assessee to establish that the non-resident agent had rendered services to the assessee for exports made by it to the foreign customers. The learned counsel furnished a copy of the order of the Tribunal in assessee case for A.Y. 2008-09 to 1010-11 and referring to that order he submitted that similar issue has been considered by the Hon'ble Tribunal and deleted the disallowance of commission payable to Mr. Lenny King of England.

The learned D.R., on the other hand, vehemently supported the order of the Assessing Officer.

We have heard the rival submissions and perused the orders of the authorities below and the decision of the Coordinate Bench in assessee’s own case for assessment years 2008-09 to 2010-11 in & 6481/Mum/2012 and ITA No. 6747/Mum/2013 dated 11.08.2016. We find that during these assessment years also the AO disallowed agency commission payable to Mr. Lenny King of England for securing sale orders from foreign market on which 10% commission was payable on FOB value by the assessee. Similar disallowance was made by the AO during the current assessment year holding that no services were rendered by the non-resident agent. The Hon'ble Tribunal after examining the contentions and evidences on record held that the commission is allowable for the M/s. Anand Enterprises services rendered by Mr. Lenny King and deleted the disallowance following the decision of the Coordinate Bench in the case of Harrison Garments Division, a sister concern of the assessee, in & 6480/Mum/2012. The facts being identical, respectfully following the decision of the Coordinate Bench in assessee’s own case for A.Y. 2008-09 to 2010-11 we uphold the order of the learned CIT(A) in deleting the disallowance of commission payable to Mr. Lenny King. Grounds raised by the Revenue are rejected.

In the result, the appeal filed by the Revenue is dismissed.