Commission payment cannot be disallowed without any allegation regarding genuineness: Bombay HC

 

 

The Indian Hume Pipe Co. Ltd. Versus Commissioner of Income Tax (Income Tax Appeal No.744 Of 2002)

Facts:

1. The assessee paid commission to M/s. Chintambi & Swaminathan, Hyderabad; A. Mohan Menon; and M/s. Manyam Engg. Enterprises, Hyderabad. The Assessing Officer allowed only 1/3 as deductible expenditure and disallowed the balance of 2/3.

2. AO was of the opinion that the entire payment cannot be considered laid out wholly and exclusively for the purpose of the business because neither the appellant assessee nor the recipients of the commission could show that orders were procured with their assistance. Therefore, the role of the commission agent is only in respect of follow-up inquiries.

Bombay HC held as below:

1. There was no allegation made in the assessment order of any flowback of the commission payment by the commission agent to the assessee, nor was it contended.

2. The commission agents have confirmed the receipt of the commission. The payments have been made through banking channels.

3. Therefore, the genuineness of the payment cannot be doubted.

4. The finding of the AO and the tribunal for disallowing part of the commission payment was not justified.