High Court Of Madras
CIT vs. L.G. Balakrishnan & Bros.
Sections 37(1), 260A
Asst. Year 1994-95
P.D. Dinakaran & N. Kannadasan, JJ.
Tax Case (Appeal) No. 827 of 2005
24th October, 2005
Counsel Appeared
N. Murlikumar, for the Appellant
JUDGMENT
N. kannadasan, J. :
The above appeal is filed as against the order dt. 26th Oct., 2004, of the Tribunal “D” Bench, Chennai.
2. The assessment of the assessee for the asst. yr. 1994-95 was completed under s. 143(3) of the IT Act on 27th March, 1997. The company manufactures a wide range of products like automotive and industrial chains, several auto ancillary products, etc. The AO found that the assessee had paid sole selling agency commission to the following persons as detailed below : Rs. The AO found that in the earlier year M/s EMDI was managed by a former employee and his wife. It has no infrastructure necessary to render the service. For the reasons discussed in the assessment for the earlier year, the claim was disallowed.
3. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A). Before the CIT (A), the assessee’s representative contended that the reliance placed by the AO on the Delhi High Court’s decision in Modi Industries Ltd. vs. CIT (1992) 108 CTR (Del) 13 : (1993) 200 ITR 329 (Del) is not correct and the said decision supports the assessee’s case. It was also contended that the Central Government approval was obtained for the agency. He accepted the assessee’s contention and allowed the appeal.
4. Aggrieved by the order of the CIT(A), the Revenue filed an appeal before the Tribunal. The contentions raised by the rival parties were on the same lines as for the asst. yrs. 1990-91 to 1993-94. After hearing the rival submissions the Tribunal accepted the contention that the agency agreement existed and the remittance was made with the permission of the RBI. The Tribunal concluded that the agency’s services were utilised and, therefore, allowed the deduction for the assessment year under consideration.
5. Aggrieved against the order of the Tribunal, the Revenue filed the appeal wherein the following substantial question of law is raised : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid to non-resident sole selling agents could not be disallowed in the absence of any evidence for their having rendered by services and by relying on irrelevant material ?”
6. The learned standing counsel for the appellant contended that the appellate authority as well as the Tribunal erred in deleting the disallowance of the commission paid to a foreign agency even though the AO demonstrated in detail as to how the sole selling agency which does not have any infrastructure facilities was a make-believe arrangement with the former employee and the foreign selling agents have not done anything for export promotion over and above what was achieved by the assessee. It is further contended that the Tribunal has overlooked the fact that the AO placed reliance upon many bills which were drawn in favour of the selling agents even though the goods having been shifted to different places and the details of the actual price for which the goods have been sold to the end buyers were not available on the invoices.
7. Though learned standing counsel raised an objection that the former employee is appointed as a sole selling commission agent, it is not in dispute that the sole selling agent had necessary qualification and his appointment was approved by the Government of India. Further, all the remittances have been made through the RBI and the recipient was not related to any of the directors of the assessee-company. Though a contention is urged to the effect that the commission paid to one sole selling agent who does not have any infrastructure facilities, should be disallowed, the Tribunal rendered a finding that the Revenue has not produced any materials in support of the said contention. The Tribunal also proceeds to the effect that no details were made available to show as to whether the AO made any enquiry with regard to the availability of the infrastructure facilities. It is not mandatory in all cases that a commission agent should have necessary infrastructure facilities to augment the business of the assessee. In fact, in the present case, there was a steep rise in the foreign exchange relating to the relevant assessment year than compared to the previous assessment year. That would substantiate that the assessee has rightly utilised the services of the commission agent who was the former employee in promoting the market in foreign countries. In this connection, it is useful to refer to the decision in Modi Industries Ltd. vs. CIT (supra) wherein the decision of the Tribunal overruling the very same objections of the Revenue was affirmed by holding that it is purely a finding of fact.
8. A perusal of the substantial question of law discloses that the appellant is aggrieved only with regard to the factual findings rendered by the appellate authority as well as the Tribunal and there is no substantial question of law involved in the present appeal. The scope of s. 260A of the IT Act, 1961 does not enable the parties to file an appeal, if they are aggrieved, as against the factual findings rendered by the appellate authority. The above view is supported by the decision of this Court in CIT vs. K. Manickam (2004) 187 CTR (Mad) 493.
9. For the reasons stated above, we are of the opinion that there is no substantial question of law raised within the ambit of s. 260A of the IT Act. We are, therefore, of the considered opinion that the appeal fails and the same is dismissed, however, there will be no order as to costs.
[Citation : 281 ITR 37]
