INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Disallowance made towards sales commission paid to HUF - In earlier year said communication was allowed -

Case of assessee was that even though commission payments were properly documented and reflected in assessee's return, the same were disallowed by AO. AO alleged that HUF cannot function to earn commission on its own. AO alleged that It is impossible to imagine that a HUF can carry out the detailed exercise of contacting the buyers and sellers and then act as a link between them until the transaction is over. As per AO, HUF is an abstract entity which is not capable of carrying out such activity. Held: In earlier assessment years, no addition was made and in the year under consideration, in the similar facts and circumstances, any disallowance was unwarranted, unjustified and arbitrary. Once the Revenue had accepted the payment of commission in the case of the assessee in past years and there has been neither any bifurcation of the functions of the assessee nor the Revenue has brought out any material on record or evidence to prove that there have been new development in the transactions of the assessee. In absence of such changes, addition on the issue could not be sustained.

Followed:Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 0858 (SC), CIT v. Neo Poly Pack (P.) Ltd. (2000) 245 ITR 492 (Del.) : 2000 TaxPub(DT) 1348 (Del-HC), and Sunil Kumar Ganeriwal v. DCIT [ITA No. 4276/Mum./2008] : 2012 TaxPub(DT) 1032 (Mum-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

SUBSCRIBE FOR FULL CONTENT