HARRISON GARMENT DIVISION, MUMBAI v. JT. C.I.T. 18(2), MUMBAI

ITA 6480/MUM/2012 | 2009-2010
Pronouncement Date: 30-04-2014 | Result: Allowed

Appeal Details

RSA Number 648019914 RSA 2012
Assessee PAN AAAFH0511K
Bench Mumbai
Appeal Number ITA 6480/MUM/2012
Duration Of Justice 1 year(s) 6 month(s) 7 day(s)
Appellant HARRISON GARMENT DIVISION, MUMBAI
Respondent JT. C.I.T. 18(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 30-04-2014
Assessment Year 2009-2010
Appeal Filed On 23-10-2012
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - H BENCH. . !'# !$%&' %! () BEFORE S/SH.D.MANMOHAN VICE-PRESIDEN T & RAJENDRA ACCOUNTANT MEMBER /. ITA NO.3022/MUM/2012 ! ! ! ! * * * * / ASSESSMENT YEAR-2008-09 HARRISON GARMENT DIVISION 337 ASHISH INDUSTRIAL ESTATE GOKHLE ROAD DADAR (W) MUMBAI-400020 VS JCIT 18(2) PIRAMAL CHAMBERS LOWER PAREL MUMBAI-400012 PAN: AAAFH0511K ( !+ / APPELLANT) ( -.+ / RESPONDENT) /. ITA NO.6480/MUM/2012 ! ! ! ! * * * * / ASSESSMENT YEAR-2009-10 HARRISON GARMENT DIVISION 337 ASHISH INDUSTRIAL ESTATE GOKHLE ROAD DADAR (W) MUMBAI-400020 VS JCIT 18(2) PIRAMAL CHAMBERS LOWER PAREL MUMBAI-400012 PAN: AAAFH0511K ( !+ / APPELLANT) ( -.+ / RESPONDENT) !/0 !/0 !/0 !/0 1 1 1 1 % %% % / ASSESSEE BY : SHRI HARIOM TULSYAN !$) 2 1 % / REVENUE BY : MS. NEERJA PRADHAN ! ! ! ! 2 22 2 0! 0! 0! 0! / DATE OF HEARING : 26-03-2014 3* ! 2 0! / DATE OF PRONOUNCEMENT : 30-04-2014 1961 2 22 2 !! !! !! !! 254 )1( % %% % &040 &040 &040 &040 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA AM %! %! %! %! () () () () !$%&' !$%&' !$%&' !$%&' % %% % ! ! ! ! : CHALLENGING THE ORDERS OF THE CIT(A)-29 MUMBAI ASSE SSEE-FIRM HAS FILED APPEALS FOR ABOVE REFERRED TWO ASSESSMENT YEARS (AY.S). GROUNDS OF AP PEAL FOR THE AY-2008-09 READS AS UNDER: THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS WRONGLY UPHELD ADDITION MADE BY THE LEARNED ASSESSING OFFICER RS.59 23 456 A BUSINESS EXPENDITURE UNDER THE HEAD AGENCY COMMISSION. THE LEARNED COMMISSIONER OF. INCOME-TAX (APPEALS) HAS NOT CONSIDERED SUBMISSIONS MADE BY APPELLANT PROVING THAT FOREIGN AGENT HAS RENDERED S ERVICES COMMISSION WAS ACCRUED ON RECEIPT OF GOODS AND THERE WAS IMPROVEMENT IN GROSS PROFIT CO MPARED TO PREVIOUS YEAR EVEN IN BAD MARKET CONDITIONS. YOUR APPELLANT CRAVES LEAVE TO ADD TO ALTER OR TO WITHDRAW ANY GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL FOR AY 2009-10: THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS WRONGLY UPHELD ADDITION MADE BY THE LEARNED ASSESSING OFFICER RS.46 07 195/- A BUSINES S EXPENDITURE UNDER THE HEAD AGENCY COMMISSION. 2 ITA NO. 3022 & 6480/MUM/2012 HARRISON GARMENT DIVIS ION THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS NOT CONSIDERED SUBMISSIONS MADE BY APPELLANT DURING THE ASSESSMENT PROCEEDINGS AND ALS O DURING THE APPEAL PROCEEDINGS I.E. I. COPIES OF REGULAR EMAILS REGARDING REIMBURSEMEN T OF EXPENSES INCURRED BY FOREIGN AGENT QUALITY-QUANTITY & CLAIMS MADE BY FOREIGN BU YERS PROVING THAT FOREIGN AGENT HAS RENDERED SERVICES II. COPIES OF LEDGER ACCOUNT AND INVOICE-WISE DETAI LS OF COMMISSION ACCRUED ON RECEIPT OF GOODS. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS WRONGLY UPHELD ASSESSING OFFICERS OBSERVATION REGARDING ABSENCE OF AGENCY AGREEMENT A ND BILLS FOR COMMISSION. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS WRONGLY UPHELD ASSESSING OFFICERS OBSERVATION REGARDING INCREASE IN TURNOVER AND INTR ODUCTION OF NEW FOREIGN BUYERS. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS OVERLOOKED PROFITABILITY I.E. NET PROFIT RS.2 31 88 509 44.52% OF RECEIPT AFTER PAYMENT OF AGENCY COMMISSION RS.46 07 195 & GROSS PROFIT RS.3 25 69 065 @62.54% ON SALES RS.5 20 79 9 25. YOUR APPELLANT CRAVES LEAVE TO ADD TO ALTER OR TO WITHDRAW ANY GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 2. ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND EXPORTING OF READYMADE GARMEN -TS.DETAILS OF DATES OF FILING OF RETURNS INCOMES R ETURNED DATES OF ASSESSMENT ASSESSED INCOMES DATES OF ORDERS OF THE CIT(A) CAN BE SUMMARISED AS UNDER: AY. DTS.OF FILING OF RETURN RETURNED INCOME (RS.) DATES OF ASSESSMENT ASSESSED INCOME DT. OF ORDERS OF CIT(A) 2008-09 27.09.2008 2 56 57 240/- 21.10.2010 3 13 24 558/- 09.02.2012 2009-10 05.09.2009 2 31 71 853/- 24.10.2011 2 88 43 390/- 26.09.2012 ITA NO. 3022/MUM/2012-AY-2008-09: DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER (AO) FOUND THAT ASSESSEE-FIRM WAS EXPORTI- NG GOODS MAINLY TO ARCADIA GROUP OF UK THAT IT HAD DEBITED TO P & L ACCOUNT WITH AGENCY COMMISSION OF RS.59.23 LACS.AO DIRECTED IT TO FILE JUSTIFICATION FOR PAYMENT OF COMMISSION AND TO FILE A COPY OF AGENCY COMMISSION AGREEMENT IF ANY. VIDE ITS LETTER DATED 09.10. 2010 ASSESSEE SUBMITTED STATEMENTS BEFORE THE AO SHOWING DATE OF SALE INVOICE PARTIES NAMES VALUE OF BILLS AND VALUE OF COMMISSION PAID ALONG WITH A DETAILED EXPLANATION. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AO HELD THAT EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE THAT IT WAS FOUND FROM THE RECORD THAT ASSESSEE WAS MAKING A PR OVISION FOR COMMISSION ON INVOICE BILLS @ 10% ON THE BASIS THAT THE COMMISSION PAYMENT WAS AP PROVED BY RBI THAT ASSESSEE DID NOT FURNISH ANY CIRCULAR/NOTIFICATION OF RBI INDICATING THAT CO MMISSION @10% OF INVOICE VALUE WAS ALLOWABLE AS BUSINESS EXPENDITURE THAT IT HAD NOT PRODUCED TH E COPY OF AGENCY COMMISSION AGREEMENT THAT IT ADMITTED THAT THERE WAS NO WRITTEN AGREEMENT WIT H THE AGENT THAT THE AGENT HAD NEVER RAISED ANY BILL FOR CLAIM OF COMMISSION THAT THERE WAS NO LED GER ACCOUNT OF THE AGENT IN THE BOOKS OF ACCOUNTS PRODUCED AND EXAMINED DURING THE ASSESSMEN T PROCEEDINGS THAT IT HAD FILED COPY OF CORRESPONDENCE WITH AGENT IN RESPECT OF REIMBURSEME NT OF EXPENSES ONLY RELATED TO EARLIER FY THAT NOT A SINGLE CORRESPONDENCE WAS FILED RELATING TO THE YEAR UNDER CONSIDERATION THAT THERE WAS NO SUBSTANTIAL INCREASE IN TOTAL TURNOVER WHEREAS C OMMISSION HAD INCREASED FROM RS.1.76 LACS TO 59.33 LACS THAT ASSESSEE WAS ENGAGED IN EXPORT OF G ARMENTS TO THE SAME CUSTOMERS FOR LAST SO MANY YEARS THAT IT DID NOT ADD A SINGLE NEW CUSTOMER DUR ING THE YEAR UNDER CONSIDERATION THAT COMMISSI -ON EXPENSES WERE CLAIMED AT A HIGHER PERCENTAGE WI TH AN INTENTION TO REDUCE THE NET TAXABLE PROFIT OF THE FIRM THAT THE ASSESSEE HAD MADE PROVISION FO R COMMISSION ON THE BASIS OF INVOICE VALUE - CLAIM AND EXPENDITURE AND P & L ACCOUNT THAT THE A SSESSEES CLAIM WITH REGARD TO COMMISSION WAS NOT GENUINE.AO GAVE THE DETAILS OF THE COMMISSI ON PAYABLE FOR THE EARLIER YEARS AND MENTION -ED THAT ASSESSEE WAS MAINTAINING ITS BOOKS OF ACCO UNTS ON MERCANTILE BASIS THAT COMMISSION EXPENSES TO THE EXTENT OF RS. 11.94 LACS WAS PAID O N PAYMENT/CASH BASIS.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AGENCY COMMISSION ON LAST SAL E SHOULD NOT BE DISALLOWED AS THE COMMISSION EXPENSES AMOUNTING TO RS. 11.94 LACS REL ATED TO FY 2006-07.ASSESSEE SUBMITTED THAT DURING THE YEAR 2006-07 THEY HAD PAID COMMISSION OF RS. 1.6 LACS ONLY AGAINST THE SALES MADE TO 3 ITA NO. 3022 & 6480/MUM/2012 HARRISON GARMENT DIVIS ION ARCADIA GROUP WITH THE UNDERSTANDING WITH FOREIGN B UYERS THAT COMMISSION WAS PAYABLE ONLY FOR FRESH ORDERS AND NOT FOR REPEAT ORDERS THAT THERE WAS DIFFERENCE OF OPINION WITH FOREIGN AGENT REGARDING COMMISSION PAYABLE ON SUPPLY MADE BY VARI OUS BILLS OF THE YEAR 2006-07 AND SAME WAS ACCEPTED DURING THE YEAR 2007-08.AS PER THE AO THE CLAIM MADE BY THE ASSESSEE WAS NOT SUPPORT - ED BY ANY DOCUMENTARY EVIDENCE.HE HELD THAT THE AGE NCY COMMISSION AMOUNTING TO RS. 11.94 LACS DID NOT PERTAIN TO THE YEAR UNDER APPEAL AND SAME W AS NOT ALLOWABLE AS BUSINESS EXPENDITURE. HE FURTHER FOUND THAT THERE WAS DUPLICATE CLAIM OF COM MISSION EXPENSES TO THE TUNE OF RS. 1.57 LACS. AS PER THE AO AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE ADMITTED THAT THERE WAS DOUBLE CLAIM OF COMMISSION OF RS.1 57 820/- DURING THE DIS CUSSION HELD WITH HIM ON 19.10. 2010.AO FURTHER HELD THAT COMMISSION EXPENSES OF RS.45 71 4 97/-(RS.59.53 LACS RS.11.94 LACS + RS.1.57 LACS) CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL WOULD NOT BE ALLOWED THAT IT HAD FAILED TO ESTABLISH WITH DOCUMENTARY EVIDENCE THAT SERVICE S WAS RENDERED BY THE FOREIGN AGENT THAT COMMISSION EXPENSES OF RS. 11.94 LACS PERTAINED TO EARLIER YEARS THAT EXPENSES AMOUNTING TO RS.1 57 820/-WAS NOT ALLOWABLE AS THE SAME WAS CLAI MED TWICE.FINALLY HE HELD THAT TOTAL COMMISSION EXPENSES OF RS. 59.23 LACS HAD TO BE ADD ED TO THE BUSINESS INCOME OF THE ASSESSEE. 2.1 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA).BEFORE HIM IT WAS ARGUED THAT AO HAD OVERLOOKED THE RBI PERMISSION CO VERING THE COMMISSION AMOUNT THAT HE DID NOT CONSIDER THE EVIDENCES LIKE REGULAR E-MAIL CORR ESPONDENCE IN RESPECT OF THE COMMISSION PAY - MENT THAT THE APPELLANT HAD MADE PAYMENT OF COMMISS ION TO MAINTAIN TURNOVER OF THE EARLIER YEAR AND TO SUSTAIN INCREASED PROFITABILITY OF THE YEAR UNDER CONSIDERATION THAT THE GROSS PROFIT RATIO FO R THE YEAR UNDER APPEAL HAD INCREASED TO 62.6% AS COM PARED TO 52.8% FOR THE LAST YEAR THAT IN CASE OF ANAND ENTERPRISES SISTER CONCERN ITAT HAD HELD THAT COMMISSION WAS ALLOWABLE THAT THERE WAS DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE AGENT. 3 .AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE A ND THE ASSESSMENT ORDER FAA HELD THAT PAYMENT OF COMMISSION WAS A PROVISION MADE ON SALE AT A FLAT RATE OF 10% THAT IF IT WAS ON THE BASIS OF SERVICE RENDERED THAN IT WOULD HAD BEEN AS CERTAINED ONLY AFTER THE REALISATION OF SALES THAT THERE WOULD HAVE BEEN ACTUAL QUANTUM OF COMMISSION MADE BY THE AGENT ON THE REALISATION BASIS THAT ASSESSEE HAD NOT CARRIED OUT ANY SUCH EXERCISE THAT THE ASSESSEE DID NOT PRODUCE AGENCY AGREEMENT AND ITS TERMS AND CONTRACTS AT THE ASSESS MENT STAGE/APPEAL STAGE THAT THE EXISTENCE OF AGENCY ITSELF WAS NOT PROVED THAT THE AGENT HAD NEV ER RAISED ANY BILL FOR CLAIM AGAINST THE ASSESSEE THAT WITHOUT ANY INCREASED IN TURNOVER COM MISSION PAYMENT HAD INCREASED SUBSTANTIALLY THAT OUT OF CLAIM OF COMMISSION PAYMENT AMOUNTING T O RS. 11.94 LACS FOR THE BILLS RAISED IN EARLIER FY.S PAYMENT WAS MADE DURING THE YEAR UNDER APPEAL THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THAT COMMISSION PAYMENT OF RS. 11.94 LACS WAS NOT RELATABLE TO THE YEAR UNDER CONSIDERATION.FINALLY HE CONFIRMED THE DISALL OWANCE MADE BY THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. BEFORE US AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT COMMISSION WAS PAID BY THE ASSESSEE IN EARLIER YEARS ALSO THAT RBI NOTIFICATION ALLOWED PAYMENT OF COMMISSION THAT THAT ABSENCE OF WRITTEN AGREEMENT DID NOT PROVE THAT COMMISSION WAS NOT PAID THAT THAT THE ASSESSEE DID NOT HAVE ANY OFFICE IN ENGLAND THAT AGENT IN ENGLAND WAS GIV ING INFORMATION TO THE ASSESSEE ABOUT GOODS TO BE SUPPLIED THAT COMMISSION WAS PAID EVEN WHEN THE ASSESSEE WAS GETTING 80HHC DEDUCTION THAT COMMISSION OF EARLIER YEAR AMOUNTING TO RS.11.94 LA CS WAS PAID DURING THE YEAR UNDER APPEAL THAT PART OF THE COMMISSION WAS WITHHELD THAT THE ASSESS EE WAS MAINTAINING LEDGER ACCOUNT OF THE COMMISSIONS PAID THAT THERE WAS DISPUTE BETWEEN THE ASSESSEE AND THE AGENT THAT PROFIT HAD INCREASED YEAR AFTER YEAR THAT IN THE MATTER OF THE SISTER CONCERN I.E.ANAND ENTERPRISES TRIBUNAL HAD ALLOWED PAYMENT OF COMMISSION THAT TOTAL TRAVEL LING EXPENSE CLAIMED BY THE ASSESSEE FOR THE YEAR AMOUNTED TO RS.88 000/-ONLY THOUGH THE ASSESSE E WAS IN THE BUSINESS OF EXPORTING HIGH END GARMENTS.HE REFERRED TO THE PAGES 26 28-30 OF THE P APER BOOK FOR 2008-09 AND PG.27-44 47 50 56 57 OF THE PB FOR AY.2009-10.HE RELIED UPON THE C ASES OF GAUTAM CREATIONS (P.) LTD. (171 TAXMAN271-DELHI HC) LAXMI ENGINEERING INDUSTRIES(29 8ITR203-RAJ HC) ANUPAM SYNTHETICS 4 ITA NO. 3022 & 6480/MUM/2012 HARRISON GARMENT DIVIS ION (P)LTD.(104TTJ119-DEL) SMT.SATINDERJIT KAUR(52TTJ38 8-CHD).DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT IT WAS NOT CLEAR AS WHAT SERVICES WE RE RENDERED BY THE AGENT THAT THERE WAS NO AGREEMENT BETWEEN THE ASSESSEE AND THE AGENT THAT E -MAILS WERE SENT TO THE ASSOCIATE CONCERN OF THE ASSESSEE THAT CIRCULAR OF THE RBI HAD FIXED TH E MAXIMUM RATE OF COMMISSION PAYABLE THAT SAID CIRCULAR DID NOT JUSTIFY PAYMENT OF COMMISSION.HE R EFERRED TO PG.27-44 32-33 36 OF THE PAPER BOOK FILED BY THE ASSESSEE FOR THE AY.2009-10 THAT ANAND ENTERPRISES WAS A SEPARATE ENTITY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THERE WAS NO FORMAL WRITTEN AGREEMENT BETWEEN THE ASSESSEE A ND THE AGENT BUT COMMISSION HAS BEEN PAID ON REGULAR BASIS TO THE AGENT IN EARLIER AS WELL AS SUBSEQUENT ASSESSMENT YEARS.AT LEAST IN THREE EARLIER ASSESSMENT YEARS AO HAD PASSED ASSESSMENT O RDERS U/S.143(3)OF THE ACT.IT IS TRUE THAT PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS BUT IT IS ALSO TRUE THAT AO.S SHOULD NOT DISTURB THE EARLIER ASSESSMENT ORDERS IF THE FACTS AND CIRCUMSTANCES REMAIN IN SUBSEQUENT YEARS.RULE OF CONSISTENCY IS ALSO ONE O F THE IMPORTANT RULES OF TAX JURISPRUDENCE.IN OTHER WORDS BY ACCEPTING AN EXPENDITURE PERMISSIBLE IN A PARTICULAR YEAR AO ALLOWS THE ASSESSEE TO BELIEVE THAT CLAIM MADE BY IT IS AS PER THE PROV ISIONS AND IS ALLOWABLE.IN THESE CIRCUMSTANCES IF ON THE SIMILAR FACTS ASSESSEE CLAIMS THE SAME EXPEN DITURE IN SUBSEQUENT YEARS AO SHOULD NOT REJECT THE CLAIM WITHOUT A REASONABLE AND JUSTIFIAB LE CAUSE-LIKE DECISION OF HIGHER JUDICIAL FORUM AGAINST THE ASSESSEE AFTER THE LAST ASSESSMENT PROC EEDINGS OR INVESTIGATION MADE BY THE DEPARTMENT BRINGING NEW FACTS OF THE CASE ON RECORD.IN THE MAT TER UNDER APPEAL WE DO NOT FIND ANY OF SUCH EXTRA-ORDINARY CONDITIONS.AGREEMENT WAS NOT THERE I N THE EARLIER YEARS ALSO SO ONLY ON THE BASIS OF ABSENCE OF A WRITTEN AGREEMENT TAX LIABILITY CANNOT BE FASTENED TO THE ASSESSEE FOR THE FIRST TIME.IT IS A NORMAL PRACTICE OF BUSINESS WORLD THAT AGREEME NTS ARE ENTERED INTO OUTLINING RIGHTS AND DUTIES OF BOTH THE PARTIES WHILE DECIDING TO CARRY OUT A S PECIFIC JOB LIKE DOING AGENCY WORK FOR THE OTHER PARTY.BUT IT IS ALSO NOT UNCOMMON THAT WITHOUT A FO RMAL AND WRITTEN AGREEMENT PARTIES DECIDE TO DO JOB AND PAY/RECEIVE COMMISSION.IN THESE CIRCUMST ANCES NO FIX FORMULA CAN BE DEVISED OR HELD TO BE APPLICABLE AS FAR AS PAYMENT OF BROKERAGE/COM MISSION IS CONCERNED.IT IS BASICALLY A BUSINESS DECISION.THOUGH THE WRITTEN AGREEMENT ARE CONSIDERE D MORE RELIABLE EVIDENCED IN ALLOWING COMMISSION PAYMENT BUT NO ASSESSEE CAN CLAIM THAT B ECAUSE OF A WRITTEN AGREEMENT COMMISSION PAID BY IT SHOULD BE ALLOWED AS A MATTER OF RIGHT.C OMMISSION PAID BY THE ASSESSEE AS PER THE FORMAL AGREEMENTS HAVE BEEN DISALLOWED BY THE DEPAR TMENT IN MANY A CASES AND COURTS HAVE UPHELD SUCH DISALLOWANCE BECAUSE IN SUCH CASES THER E WAS NO EVIDENCE OF RENDERING OF SERVICES BY THE AGENT OR THE PAYMENT MADE BY THE ASSESSEE HAD C OME BACK TO THE ASSESSEE IN ONE OR OTHER FORM.MERE EXISTENCE OF AN AGREEMENT CANNOT DECIDE T HE ALLOWABILITY OF COMMISSION PAYMENT IT IS THE PRESENCE OF SURROUNDING CIRCUMSTANCES AND BASIC FACTS THAT DECIDE THE ISSUE IN CONCLUSIVE MANNER.SIMILARLY NON EXISTENCE OF WRITTEN AGREEMENT CANNOT BE SOLE BASE FOR DISALLOWANCE OF COMMISSION PAYMENT IF OTHER EVIDENCES PROVE THE FAC T OF INCURRING OF SUCH EXPENDITURE WHOLLY AND EXCLUSIVELY.WE FIND THAT IN THE MATTER OF GAUTA M CREATION (SUPRA)HONBLE DELHI HIGH COURT HAS HELD THAT COMMISSION PAID IN ABSENCE OF A WRITT EN AGREEMENT CAN BE ALLOWED IF WORK WAS DONE BY THE AGENT FOR THE ASSESSEE WHO PAYS COMMISSION T O THE AGENT.IN THAT MATTER CLAIM MADE BY THE ASSESSEE FOR COMMISSION PAYMENT WAS REJECTED BY THE AO AND WAS CONFIRMED BY THE FAA.IN THE APPEAL TRIBUNAL ON APPRECIATION OF EVIDENCE CONCL UDED THAT THERE WAS AN AGREEMENT THOUGH NOT A WRITTEN ONE BETWEEN PARTIES AND WORK WAS DONE BY CO MMISSION AGENTS PURSUANT THERETO THUS JUSTIFYING PAYMENT MADE BY THE ASSESSEE.HONBLE DIS MISSED THE APPEAL FILED BY THE DEPARTMENT AND UPHELD THE ORDER OF THE TRIBUNAL.IN THE CASE UN DER CONSIDERATION IT IS FOUND THAT THE ASSESSEE HAD INCURRED NEGLIGIBLE EXPENDITURE UNDER THE HEA D FOREIGN TRAVEL THOUGH IT IS MAINLY IN THE BUSINESS OF EXPORT.IT IS ALSO FOUND THAT IT DOES NO T HAVE OFFICE OUR OF INDIA.IT IS GETTING ORDER FROM ITS AGENT AND PAYMENT IS ROUTED THROUGH PROPER BANK ING CHANNELS. FROM THE RECORDS IT IS CLEAR THAT PROFIT OF THE ASSESSEE IS ALSO INCREASING.CORRESPON DENCE OF THE FOREIGN AGENT CLEARLY SHOW THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORTING GO ODS AND IS MAKING PAYMENTS TO THE AGENT REGUL -ARLY.IT CANNOT BE DENIED THAT THERE WAS A LONGSTAN DING RELATIONSHIP BETWEEN ASSESSEE AND SELLING AGENT ONE OF THE MAIN INGREDIENT FOR ALLOWING /DISA LLOWING COMMISSION PAYMENT.WE FIND THAT IN 5 ITA NO. 3022 & 6480/MUM/2012 HARRISON GARMENT DIVIS ION THE CASE OF THE SISTER CONCERN ANAND ENTERPRISES TR IBUNAL HAD DEALT WITH THE IDENTICAL ISSUE FOR THE YEAR 2005-06(ITA/3782/2008-DATED 19.11.2011) FACTS OF THAT CASE WERE THAT SISTER CONCERN WAS ALSO ENGAGED IN THE BUSINESS OF MANUFACTURING AND E XPORT OF GARMENTS IN THE YEAR IN QUESTION IT HAD CLAIMED DEDUCTION UNDER THE HEAD AGENCY COMMIS SION THAT THE COMMISSION WAS PAID ONLY TO ONE PARTY NAMELY MR. LENNY KING. THE ASSESSEE WAS CALLED UPON TO FURNISH DETAILS OF COMMISSION PAID AND SERVICES PROVIDED.THE ASSESSEE SUBMITTED THAT THE AGENCY COMMISSION WAS PAYABLE AT 10% OF F.O.B. VALUE AS MENTIONED IN GRS WHICH WERE APPROVED BY THE RESERVE BANK OF INDIA.THE AO HELD THE SUBMISSIONS OF THE ASSESSE E WERE GENERAL IN NATURE THAT THERE WAS NO NEW BUYER INTRODUCED BY THE SAID AGENT.HE ALLOWED C OMMISSION AGENCY EXPENDITURE @ 2.88% FOLLOWING THE RATE AT WHICH COMMISSION WAS PAID LAS T YEAR.RESULTANTLY AN ADDITION OF RS.32 11 200/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE PROCEEDINGS FAA DELETED THE ADDITION MADE BY THE AO.DIMISSING THE APPEAL FILED BY THE AO TRIBUNAL HELD AS UNDER: 4.AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THE AS SESSEE AVAILED THE SERVICES OF THE FOREIGN AGENT IN RESPECT OF EXPORTS EFFECTED BY IT AS WAS APPARENT FROM THE GRS. THIS FACT WAS ALSO APPROVED BY THE RBI. FROM PAGE L8 OF THE PAPER BOOK BEING THE STAT EMENT SHOWING COMPARISON OF GROSS PROFIT AND BUSINESS INCOME FOR THIS YEAR VIS--VIS EARLIER YEA R IT CAN BE NOTICED THAT THE EXPORT SALES IN THIS YEAR INCREASED FROM RS.8.06 CRORES TO RS.11.15 CROR ES. DESPITE THE PAYMENT OF COMMISSION AT L0% TO A PERSON WHO IS UNRELATED TO THE ASSESSEE THE G ROSS PROFIT AS WELL AS THE NET PROFIT OF THE ASSESSEE SAW SUBSTANTIAL INCREASE IN TERMS OF AMOUN T AS WELL AS PERCENTAGE. THE FACT THAT THE ASSESSEE DID PAY COMMISSION TO ITS FOREIGN AGENT HA S BEEN ACKNOWLEDGED BY THE AO AS IS APPARENT FROM HIS DECISION IN RESTRICTING THE DEDUCTION TO 2 .88% OF THE TURNOVER. ONCE THE COMMISSION IS ACCEPTED TO HAVE BEEN PAID THERE IS NO LOGIC IN DIS ALLOWING SUCH EXPENDITURE BY HOLDING THAT IT WAS EXCESSIVE.IT IS FOR THE ASSESSEE TO DETERMINE THE W AY IN WHICH IT HAS TO CARRY ON ITS BUSINESS. THE ASSESSEE HAS TO DECIDE THE PERCENTAGE OF COMMISSION WHICH IS TO BE ALLOWED BY HIM CONSIDERING ALL THE ATTENDING CIRCUMSTANCES AND THE BUSINESS EXIGEN CIES.IN OUR CONSIDERED OPINION THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCE OF THE CASE UNDER APPEAL AND FOLLOWING THE ORDER OF THE COORDINATING BENCH DELIVERED IN THE CASE OF ANAND ENTERPRISES(SUPRA) WE ARE OF THE OPINION THAT COMMISSION PAID BY THE ASSESSEE TO ITS AGENT I S AN ALLOWABLE EXPENDITURE. 5.A. AS FAR AS COMPUTATION OF DISALLOWANCE IS CONCERNED WE FIND THAT THE ASSESSEE ITSELF HAD AGREED DURING THE ASSESSMENT PROCEEDINGS EXPENSES AMOUNTIN G TO RS.1 57 820/-WAS NOT ALLOWABLE AS THE SAME WAS CLAIMED TWICE.SO IN OUR OPINION AO WAS JUS TIFIED IN NOT ALLOWING THE SAID AMOUNT.IN OUR OPINION ISSUE OF PAYMENT OF COMMISSION OF RS.11 .79 LAKHS NEEDS FURTHER VERIFICATION AS IT IS CLAIMED FOR THE EARLIER YEARS AND IT WAS STATED BY THE ASSESSEE IT HAD DISPUTE WITH THE AGENT.WE ARE OF THE OPINION IN THE INTEREST OF JUSTICE THIS ISSUE SHOULD BE SENT BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE WHO WOULD PRODUCE EVIDENCES OF DISPUTE WITH THE AGENT A ND JUSTIFICATION FOR PAYMENT OF COMMISSION OF EARLIER YEARS IN THE YEAR UNDER APPEAL.AS A RESULT WE CONFIRM ADDITION OF RS. 1.57 LAKHS OUT OF THE TOTAL DISALLOWANCE.AO WILL TAKE FRESH DECISION ABOU T RS.11.79 LAKHS AFTER HEARING THE ASSESSEE.BALANCE COMMISSION OF RS.45.87(59.23 LAKHS -1.57+11.79 LAKHS) PAID BY THE ASSESSEE TO THE AGENT STANDS ALLOWED IN VIEW OF THE ABOVE DISCU SSION. APPEAL FILED BY THE ASSESSEE FOR THE YEAR 2008-09 IS ALLOWED IN PART. ITA/6480/MUM/2012-AY.-2009-10: 6. IN THE YEAR UNDER APPEAL ASSESSEE HAD CLAIMED COMMI SSION PAYMENT OF RS.46.07 LAKHS.AS PER THE AO THE ASSESSEE HAD PAID THE SAID AGENCY COMMIS SION TO ONE PARTY I.E.LENNY KING OF UK FOR GARMENT SALE. AO HELD THAT THERE WERE NOT ENOUGH EV IDENCE OF RENDERING OF SERVICES BY THE AGENT THAT THE ASSESSEE HAD NOT FURNISHED ANY CIRCU LAR/NOTIFICATION OF RBI WHICH INDICATED THAT COMMISSION @10% ON INVOICE VALUE WAS ALLOWABLE AS B USINESS EXPENDITURE THAT THE AGENT NEVER RAISED ANY BILL THAT THERE WAS NO INCREASE IN PROFI TABILITY OR TURNOVER OF THE BUSINESS DURING THE 6 ITA NO. 3022 & 6480/MUM/2012 HARRISON GARMENT DIVIS ION YEAR THAT COMMISSION PAYMENT WAS CLAIMED TO REDUCE THE PROFIT OF THE ASSESSEE. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA AND CON TENDED THAT AO HAD OVER LOOKED THE PERMISSION OF THE RBI PERMITTING THE PAYMENT OF COM MISSION THAT EVIDENCES LIKE EXCHANGE OF E- MAIL AND CORRESPONDENCE WAS SUBMITTED BEFORE THE AO THAT IN THE CASE OF SISTER CONCERN TRIBUNAL HAD HELD THAT COMMISSION WAS ALLOWABLE AND THE DEPA RTMENT COULD NOT DETERMINE HOW TO CARRY ON THE BUSINESS. 6.1. IN APPELLATE PROCEEDINGS FAA HELD THAT COMMISSION W AS BASED ON SALE ON A FLAT RATE THAT IT WAS NOT PAID FOR THE SERVICES PROVIDED AGENCY AGREEMENT WAS NOT PRODUCED AGENT HAD NOT RAISED BILLS THAT THERE WAS NO INCREASE IN TURNOVER OR PROFIT. 6.2. BEFORE US AR AND THE DR MADE THE SAME SUBMISSIONS T HAT WERE MADE FOR THE EARLIER YEAR- THE ONLY DIFFERENCE WAS THE REFERENCE TO THE RBI CIRCUL AR BY THE AR IN HIS ARGUMENTS. 6.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT CI RCULAR OF THE RBI IS ON RECORD AND THAT THE ABSENCE OF THE SAID CIRCULAR WAS ONE OF THE REASONS FOR DISALLOWANCE.FOR THE REASONS GIVEN BY US AT PARAGRAPH NO.5OF OUR ORDER WE REVERSE THE ORDER OF THE FAA.AS A RESULT EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR FOR THE YEAR UNDER APPEAL. APPEAL FIL ED BY THE ASSESSEE FOR AY.2009-10 IS ALLOWED. AS A RESULT APPEAL FILED BY THE ASSESSEE FOR THE AY .2008-09 IS ALLOWED IN PART.APPEAL FOR THE YEAR 2009-10 STANDS ALLOWED. 607 !/0 2 * 2008-09 2 507 $> 2 $!0 ? . * 2009-10 2 $> 2 $!0 ?. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL 2014 . (%5 2 3* ! % &!! B C(! 30 VIZSY 201 4 2 4 D SD/- SD/- ( . / D.MANMOHAN) ( !$%&' !$%&' !$%&' !$%&' / RAJENDRA) !'# / VICE PRESIDENT %! %! %! %! () () () () /ACCOUNTANT MEMBER / MUMBAI C(! /DATE: 30.04.2014. SK (%5 (%5 (%5 (%5 2 22 2 -0E -0E -0E -0E F%E*0 F%E*0 F%E*0 F%E*0 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / !+ 2. RESPONDENT / -.+ 3. THE CONCERNED CIT(A)/ G H 4. THE CONCERNED CIT / G H 5. DR H BENCH ITAT MUMBAI / EI!4 -0 . . &!! . 6. GUARD FILE/ 4! 6! .!E0 .!E0 .!E0 .!E0 -0 -0-0 -0 //TRUE COPY// (%5!! / BY ORDER / ! $! DY./ASST. REGISTRAR /ITAT MUMBAI