Cit vs Shriram Pistons & Rings Ltd
2012 Latest Caselaw 1085 Del

$~3, 12, 13, 15 & 16

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      ITA 45/2012
+      ITA 1161/2011
+      ITA 1177/2011
+      ITA 1214/2011
+      ITA 8/2012
                                      Date of decision: 16th February, 2012

       CIT                                             ..... Appellant
                           Through:    Mr. Sanjeev Rajpal, Adv.

                      versus

       SHRIRAM PISTONS & RINGS LTD            .... Respondent

Through: Mr. Ajay Vohra with Ms. Kavita Jha & Mr. Vijay Kumar Punna CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V.EASWAR

SANJIV KHANNA, J.: (ORAL)

C.M. APPL. No.804/2012 (for exemption) in ITA No.45/2012

Exemption allowed subject to all just exceptions.

The application stands disposed of.

ITA 45/2012, ITA 1161/2011, ITA 1177/2011, ITA 1214/2011 & ITA 8/2012

These appeals by the Revenue under Section 260A of the Income

Tax Act, 1961, (Act, for short) pertain to the assessment years 1998-99,

2000-01, 2001-02, 2002-03 & 2004-05. We are inclined to dispose of

these appeals by this common order as the issue raised is ibidem and

identical. The appeal for the assessment years 2000-01 to 2002-03

were disposed of by the Income Tax Appellate Tribunal (Tribunal, for

short) vide order dated 25th February, 2011 and the appeals for the

assessment years 1998-99 and 2004-05 were disposed of by the tribunal

vide order dated 31st May, 2011.

2. We note one distinguishing factor in respect of assessment year

1998-99. The tribunal by an earlier order dated 24th April, 2003 in ITA

No.1814/2002 had passed an order of remit and restored the matter to

the Assessing Officer to examine the question the payment of

commission to agents.

3. Ld. counsel for the Revenue has relied and referred to the

assessment order in respect of assessment year 1998-99. He has drawn

our notice to the letters/communications received from various State

Road/Municipal Transport Corporation/Undertakings in response to the

queries raised by the Assessing Officer. These letters have been

quoted. The State Road/Municipal Transport Corporation/Undertakings

have stated that they did not recognize any agent and they did not

communicate with any agent. Further, payments were directly made

for the goods supplied by the respondent-assessee. In these letters it is

also stated that supplies were made at the stipulated rate agreed and

fixed by the Association of State Road Transport Undertaking. The

terms and conditions of sales were stipulated by the Association of

State Road Transport Undertaking. It is highlighted that the State

Road/Municipal Transport Corporation/Undertakings have denied that

any of the agents were allowed to procure orders, obtain amendments

or arrange inspections and were involved with clearance of payment

4. In the assessment year 1998-99, the Commissioner of Income

Tax (Appeals) had allowed the application filed by the respondent-

assessee for additional evidence under Rule 46A of Income Tax Rules,

1962. The respondent-assessee had placed on record the new supply

contract issued by the Association of the State Road Transport

Undertakings, which included names of the agents. The CIT (Appeals)

referred to the factual matrix/accounts and had highlighted the fact that

the assessee had claimed commission expense of Rs.3.34 crores and

discount of Rs.14.58 crores during the year. Out of this, commission of

Rs.22,94,485/- was paid to various agents in respect of supplies made

to State Road/Municipal Transport Corporation/Undertakings. The

Assessing Officer had disallowed commission payment on the supplies

made to the State Road/Municipal Transport Corporation/Undertakings

and not in respect of other sales. We may only note here that the

figures are virtually identical or similar in other years. The

CIT(Appeals) allowed the appeal of the respondent-assessee but

restricted the claim of commission to 4.5% of the total sales made to

the State Road/Municipal Transport Corporation/Undertakings.

5. The Tribunal by the impugned order dated 31.5.2011 has

dismissed the appeal of the Revenue and has accepted the cross appeal

against the order of the CIT(Appeals), restricting the claim of

commission to 4.5%. It may be stated that the commission paid to

different agents varied between 4% to 5%.

6. The order dated 31.5.2011, relies upon the earlier order dated

25.2.2011 of the tribunal. This order dated 25.2.2011 is elaborate and

detailed. The respondent-assessee had furnished names and details of

the 14 agents appointed by them in different parts of the country. The

tribunal has referred to the sample agreement of payment of

commission entered into between the respondent-assessee and one of

the agents. The tribunal noticed that the agreement refers to

procurement of order as per the price and terms were already

determined, postulates of follow up and other activities to be

undertaken by the agent. The relevant clauses of the agreement read:-

"(i) To procure orders from State Road/Municipal Transport Corporation/Undertakings as per price and terms already determined.

(ii) To commit delivery schedule on receipt of confirmation in writing from the assessee.

(iii) To provide regular feedback on competitor's activates.

(iv) To complete follow-up till realization of full payment as under :-

(a) Realization of payment within 60 days from the date of bills.

(b) Realization of all debit note for price difference/excise duty etc. within 120 days from the date of debit notes.

(v) To submit a brief monthly report."

7. It was noticed that the respondent-assessee has effected sales to

private parties through agents and payment of commission to the said

agents has been accepted. Further the payment to the agents have been

made directly. The tribunal records the said agents were not bogus or

non-existing parties, and there was no such allegation or finding. Their

addresses and PAN numbers were furnished to the Assessing Officer.

The agents were paid by crossed cheque, only after realization of bills

from the State Road/Municipal Transport Corporation/Undertakings.

The tribunal further observed that as per the agreements the agents

were to perform several obligations/duties in form of providing regular

feedback of competitors activities, price and supplies, follow up with

the buyers for realization of full payment, submission of monthly

reports and also to ensure that the delivery schedule was accepted.

8. One of the issues and contention raised before the tribunal was

whether the commission payment in fact represented illegal

gratification paid to some of the officers of the State Road Transport

Corporation/ Municipal/ Undertakings. The tribunal noticed that there

was no direct evidence or material to support the said contention. We

may only record here that the Assessing Officer did not summon or

examine any of the agents and make further inquiries regarding deposit

of money in the account of the agent, withdrawal etc. to verify the said

aspects. The tribunal has observed that the prices were fixed pursuant

to national competition bids. These bids were examined by the

standing committee and accepted. The standing committee had fixed

the rates and the standard terms and conditions. The supplies were,

therefore, made as per the rates fixed by the standing committee of

Association of State Road Transport Undertakings, who had not only

approved the rate but also broadly approved the terms and conditions of

supply. The tribunal after referring to the evidence on record,

crystallized their findings :-

"We further find that the following facts are undisputed: -

(1) None of the agents are related to the assessee. (2) Payments have actually been made by account payee cheques.

(3) Most of the agents were working for the assessee for the last so many years and rendering similar services. These agents are Income-Tax assessees.

(4) These agents were recognized by the Association of State Road Transport Undertaking.

(5) The AO has not brought any evidence on record to show and establish that the payment made by the assessee to commission agents for rendering various services to the assessee is prohibited by law or is an office or is against

the public policy. The AO has stated so merely on his assumptions and presumptions without considering the various services rendered by the commission agents to the assessee since last so many years.

(6) It is not the case where commission has been paid for procuring only orders from the State Transport Undertaking but has been paid for rendering various services as noted above."

9. The conclusion reached by the tribunal is a finding of fact. The

tribunal weighed the evidence before them and on preponderance of

possibilities has accepted the claim/contention of the respondent-

assessee. The contention of the Revenue is that the existence of the

agency agreement, payment to the agent did not prove and establish

that the commission paid was an allowable expense under Section 37 of

the Act. However, the contention does not notice that the tribunal has

not merely relied on the agreement and the actual payment, but has

accepted and agreed that evidence exists to show and establish nature

of services actually rendered by various agents at different places

throughout India. The order dated 25.2.2011 refers to a paper book

filed by the respondent-assessee in support of his contention that the

agents were interacting with the State Road/Municipal Transport

Corporation/Undertakings. It was observed that there was no evidence

or material, except suspicion or a surmise that the commission

payment, in fact, represents illegal gratification paid to unknown

officers and therefore, should not be allowed as a deduction. A factual

decision is perverse if the authority has acted without any evidence or

on a view of facts cannot be reasonably entertained. A perverse finding

is one, if it is arrived at without any material or if it is arrived at or

inference is made on material which would not have been accepted or

relied upon by any reasonable person. It is based on surmises,

conjectures or suspicions and is not rationally possible. A factual

conclusion is regarded as perverse, when no person duly instructed or

acting judicially could upon the record before him, have reached the

conclusion arrived at the tribunal/ authority. [See CIT Vs. S.P. Jain

(1973) 87 ITR 370 (SC)]. On the basis of material referred to and the

reasoning given by the tribunal it is no possible to hold that findings

recorded are rationally illogical, inconsistent with the facts on record or

not supported by evidence and material. The appeals are dismissed on

the ground that no substantial question of law arises. No costs.

SANJIV KHANNA, J

R.V.EASWAR, J FEBRUARY 16, 2012 hs/vld