BOMI RUSTOMJI KARANJIA,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, PUNE

This appeal by the assessee against the order dated 30-11-2016 passed by the Commissioner of Income Tax (Appeals)-9, Pune [„CIT(A)‟] for assessment year 2013-14.

Ground No. 1 raised by the assessee challenging the action of CIT(A) in confirming the disallowance of sales commission expenses paid to non- resident and employees in the facts and circumstances of the case.

Heard both the parties and perused the material available on record. We note that the assessee claimed allowance of sales commission expenses to a foreign party and to its employees at Rs.2,72,350/- and Rs.12,91,116/-, respectively. Regarding the payment to foreign party the AO observed that no TDS was deducted and no reasons furnished for non deduction of TDS. Accordingly, the AO disallowed entire amount of Rs.2,72,350/-. Before the CIT(A), it was contended that non-resident did not carry on any business operations in the taxable territories and only acted as selling agents outside India. The ld. AR, Shri Dilip Kumar Kaur submits that the relevant evidences were filed before the CIT(A) i.e. copy of bill from non-resident agent along with ledger extract of customer. The CIT(A) did not discuss about such evidences and confirmed the addition made by the AO unilaterally. We note that, for want of evidences, the AO disallowed the amount paid to foreign party and the CIT(A) did not discuss about the evidences filed in this regard. The ld. DR, Shri Sudhendhu Das reported no objection in remitting the file to the AO. Therefore, taking into consideration the submissions of ld. AR and ld. DR in the facts and circumstances of the case, we deem it proper to remand the matter to the file of AO for its fresh adjudication. The assessee is liberty to file evidences, if any, in support of its clam.

Regarding commission paid to employees, we note that the AO for want of evidences disallowed an amount of Rs.12,91,116/-. The CIT(A) observed that the sales commission claimed to have been paid to the employees is not justifiable as its duty of the employees to function in the interest of assessee during discharge of their duties and for which they are being paid salary by the assessee. He also observed that no evidences substantiating the said payments were filed. Before us, the ld. AR drew our attention to the page Nos. 50 to 52 and submitted though the evidences filed in respect of details of sales commission before the CIT(A) but no relief was given by the CIT(A) by examining the same. We note that the first item in the ledger account relating to sales commission of assessee clearly shows the deduction of TDS of Rs.1,29,112/- and no discussion was made by the CIT(A) in this regard. Therefore, taking into consideration the facts and circumstances of the case, we deem it proper to remand this issue also to the file of AO for its fresh adjudication. The assessee is liberty to file evidences, if any, in support of its clam. Ground No. 1 is allowed for statistical purpose.

Ground No. 2 raised by the assessee challenging the action of CIT(A) in confirming the addition made by the AO on account of gifts given to employees on the occasion of deewali in the facts and circumstances of the case.

Heard both the parties and perused the material available on record. We note that in response to the above disallowance the AO sought details from the assessee against which the assessee filed ledger extract and copy of bill form the Ranka Jewellers. According to AO, the assessee did not give any justification for such gifts on the occasion of festival and in the absence of which he disallowed an amount of Rs.10,83,603/-. Before the CIT(A), we note that no evidences substantiating gold coin gifts have furnished. The ld. AR drew our attention to the ledger account of sales promotion of assessee and also bill issued by the Ranka Jewellers. The ld. AR submits that both the authorities below did not consider the said bill and ledger account and readily agreed for remand of this issue to the file of AO. The ld. DR reported no objection. Therefore, taking into consideration the submissions of ld. AR and ld. DR in the facts and circumstances of the case, we deem it proper to remand the matter to the file of AO for its fresh adjudication. The assessee is liberty to file evidences, if any, in support of its clam. Ground No. 2 is allowed for statistical purpose.

Ground No. 3 raised by the assessee against the disallowance of Rs.2,12,070/- on account of travelling expenses in the facts and circumstances of the case.

Heard both the parties and perused the material available on record. In the assessment proceedings, we note that the assessee produced copies of bills, challans and vouchers in support of travelling expenses and the AO for want of further evidences disallowed 10% of total travelling expenses of Rs. 2,12,070/- (Rs.21,20,676/- of 10%) was disallowed. The CIT(A) also held the said expenses were not supported by evidences. The ld. AR drew our attention to the page Nos. 55 to 78 and argued that all the evidences were filed before the CIT(A) but no discussion whatsoever accorded for justifying the said expenditure but readily agreed for remand the matter to the file of AO for its fresh adjudication. The ld. DR reported no objection. Therefore, taking into consideration the submissions of ld. AR and ld. DR in the facts and circumstances of the case, we deem it proper to remand the matter to the file of AO for its fresh adjudication. The assessee is liberty to file evidences, if any, in support of its clam. Ground No. 3 is allowed for statistical purpose.

In the result, the appeal of assessee is allowed for statistical purpose.