Rajesh Exports Ltd V. Assistant Commissioner of Income Tax, Circle 12(4) Bangalore

ITA/1140/2008

AI Insights

The case involves M/s Rajesh Exports Ltd, which appealed against the order of the Income Tax Appellate Tribunal (ITAT) Bangalore, which had disallowed a deduction of Rs. 2.00 crores claimed as expenditure for payment of commission for the Assessment Year 2004-2005. The primary legal questions revolved around the entitlement to deductions under Section 37(1) of the Income Tax Act, 1961, the justification for disallowing what was considered genuine expenditure, and the tribunal's rejection of additional evidence. The High Court of Karnataka, after reviewing the submissions and the evidence on record, concurred with the lower authorities' findings and dismissed the appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 807606 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 27-10-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Commission Payment; Deduction; Expenditure; Income Tax; Assessment Year 2004-2005
• Section: 37(1); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 27th DAY OF OCTOBER 2014 PRESENT THE HON’BLE MR JUSTICE N. KUMAR AND THE HON’BLE MR JUSTICE B. MANOHAR ITA NO. 1140/2008 BETWEEN : M/S RAJESH EXPORTS LTD NO 4, BATAVIA CHAMBERS, K.K ROAD, KUMARA PARK WEST, BANGALORE 560 001 REP BY ITS CHAIRMAN SRI RAJESH J MEHTA AGED ABOUT 45 YEAS S/O SRI JASWANTHRAI MEHTA ..APPELLANT (By Sri S PARTHASARATHI, Adv.) AND THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(4) BANGALORE ... RESPONDENT (By Sri K V ARAVIND, Adv) This appeal is filed u/S.260-A of I.T.Act, 1961 arising out of Order dated 14-08-2008 passed in ITA No. 51/BNG/2008, for the Assessment Year 2004-2005, praying that this Hon'ble Court may be pleased to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT Bangalore in ITA No. 2 51/BNG/2008,dated 14-08-2008 in the interest of justice and equity. This appeal coming on for hearing this day, N Kumar J., delivered the following: JUDGMENT The assessee has preferred this appeal against the order passed by the authorities declining to allow Rs.2.00 crores as expenditure incurred for payment of commission. 2. The following substantial question of law were raised at the time of admission: i) Whether in law and on the facts and circumstances of the case, the Appellant was entitled to deduction under Section 37(1) of the Act on the expenditure incurred for payment of commission when the commission payment was for the services rendered by the agent which was agreed to at an arm’s length transaction where the parties are strangers and both are independent limited companies? ii) Whether in law and on the facts and circumstances of the case, the Tribunal was justified in disallowing the genuine expenditure especially when the Appellant did not have adequate opportunity before the lower authorities to support its case? 3 iii) Whether in law and on the facts and circumstances of the case, the Appellant was able to substantially demonstrate the services rendered by the agent and the payment made by way of commission was reasonable and genuine which the recipient had also acknowledged and consequently is the decision of the Tribunal not perverse? iv) Whether in law and on the facts and circumstances of the case, the Tribunal was justified in rejecting the additional evidence adduced by the Appellant without appreciating that the same was required for the substantial cause in order to justify the claim of deduction for the expenditure? 3. We have heard the learned counsel for the parties. 4. Three authorities on appreciation of the evidence on record have concurrently held that the assessee has failed to prove the expenditure incurred by way of payment of commission. The assessing authority in his order has given cogent reasons which are extracted by both the higher authorities. 5. We find that the reasoning given by the three authorities in coming to the conclusion that the 4 assessee has failed to prove the expenditure incurred for payment of commission is based on the legal evidence on record and it cannot be found fault with. However, invoking Rule 29 of the IT Rules, some more documents were produced before the tribunal requesting the tribunal to look into those documents. The tribunal by cogent reasons has refused to entertain the applications and the reasons are good and do not suffer from any legal infirmity. Therefore, that portion of the order of the tribunal also cannot be found fault with. 6. Whether the assessee has incurred any excess expenditure by way of payment of commission is purely a question of fact. When three fact finding authorities have carefully scrutinized the entire material on record and concurrently held that the assessee has failed to prove the payment of commission, the authorities were justified in disallowing the said expenditure. Though, four substantial questions of law were framed, it is purely a question of fact and we do not find any infirmity in the orders passed by the authorities below. 5 We do not find any justification to interfere with the said order. In those circumstances, question of answering the so called substantial questions of law framed at the time of admission would not arise. Accordingly, appeal is dismissed. sd/- JUDGE sd/- JUDGE Brn "