Madras H.C : Where assessee-exporter paid buyer’s commission for procuring export orders and genuineness of payment was established, commission was deductible as business expenditure

High Court Of Madras

CIT Vs. E. Ramachandran

Assessment Year : 2003-04

Section : 37(1)

Mrs. Chitra Venkataraman And Ms. K.B.K. Vasuki, Jj.

T.C. Appeal No. 1763 Of 2008

August  13, 2013

JUDGMENT

Mrs. Chitra Venkataraman, J.-The above tax case appeal is filed at the instance of the Revenue as against the order of the Income-tax Appellate Tribunal for the assessment year 2003-04. The tax case appeal was admitted on the following substantial question of law :

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing the ‘buyers commission’ to be deducted from the sale proceeds in the absence of any agreement ?”

2. The assessee carrying on the business of export of fabrics and garments. During the year under consideration, the assessee claimed expenses of Rs. 35,26,697 under the caption “buyers commission” paid to one M/s. Jules through its agent, Mr. Robert Fabie. It is stated that the commission was paid to the said person for procuring export orders. The amount of commission paid was deducted from the sale consideration and only the net amount was credited to the account of the assessee. The Assessing Officer rejected the claim of the assessee for deduction on the ground that the assessee had not furnished any record in writing as regards the payment of commission to the agent. As against the order of the Assessing Officer rejecting his claim, the assessee went on appeal before the Commissioner of Income-tax (Appeals). The first appellate authority pointed out that the details of the “buyers commission” was brought on record and the said practice of “buyers commission” was consistently followed over a long period of time, and the examination of the “buyers commission” accounts also revealed that while negotiating the gross amount being sale value was given credit by the bank and at the time of realisation the amount of commission payable to the agent was withheld by the buyer and the bank charges were debited to the assessee’s account. Considering the above that the payment of commission was in terms of purchase order, the first appellate authority allowed the assesses’s appeal. The assessee also relied on copy of the invoice wherein the commission due was deducted from the invoice value of sales by the buyer itself and only the balance being the net amount was remitted to the assessee in terms of the letter of credit and other conditions. Thus, the Commissioner of Income-tax (Appeals) allowed the assessee’s appeal. As against the same, the Revenue went on further appeal before the Income-tax Appellate Tribunal. The Tribunal, in its order, referred to the earlier order passed by Assessing Officer accepting the claim of the assessee relating to the subsequent assessment year 2004-05. It further pointed out that even for the subsequent assessment year, the bills produced clearly showed the net amount paid after deducting the commission in the bills and held that in the absence of any further materials from the Revenue to reject the plea of the assessee, the Revenue’s appeal was liable to be rejected and, accordingly, dismissed the Revenue’s appeal. Aggrieved by the same, the present appeal by the Revenue.

3. We do not find any ground to disturb the finding of fact given by the Tribunal. On going through the relevant bills as well as the accounts of the assessee, the authorities below came to the conclusion on the genuineness of the payment made to the agent while negotiating the sale and that when the Department had accepted this practice for the subsequent year, viz., 2004-05, we do not find any ground to disturb the order of the Tribunal. In any event, even assuming for a moment that the assessment year under consideration, viz., 2003-04 stands on its own, on the materials available on record and the finding of fact thus arrived at, we do not find any perversity to disturb the order of the Tribunal. Consequently, the above tax case (appeal) fails and the same is dismissed. No costs.

[Citation : 359 ITR 671]