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Commissioner of Income Tax-II v. M/s.L.G.Balakrishnan and Bros. - T.C.(Appeal) No.827 of 2005  RD-TN 743 (24 October 2005)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
The Hon'ble Mr.Justice P.D.DINAKARAN
The Hon'ble Mr. Justice N.KANNADASAN
T.C.(Appeal) No.827 of 2005
Commissioner of Income Tax-II
Coimbatore. .. Appellant -Vs-
M/s.L.G.Balakrishnan and Bros.,
Coimbatore-641 006. .. Respondent This appeal is preferred under Sec.260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tri Bench, dated 26.10.2004 in ITA No.796/Mds/98.
For Appellant : Mr.N.Muralikumar
For Respondent : -
(JUDGMENT OF THE COURT WAS DELIVERED BY N.KANNADASAN, J.)
The above appeal is filed as against the order dated 26.10.2004 of the Income Tax Appellate Tribunal; 'D' Bench, Chennai.
2. The assessment of the assessee for the assessment year 1994-95 was completed under Section 143(3) of the Income Tax Act on 27.3.1997. The company manufactures a wide range of products like automotive and industrial chains, several auto ancillary products etc. The Assessing Officer found that the assessee had paid soleselling agency commission to the following persons as detailed below:-
EMDI Asia (P) Ltd., Singapore Rs. 1,78,379/- EMDI Europe SA, Luxemborg Rs.39,19,825/-
---------------- Total Rs.40,9 8,204/-
================ The Assessing Officer 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 reasons discussed in the assessment for the earlier year, the claim was disallowed.
3. Aggrieved by the order of the Assessing Oficer, the assessee filed an appeal before the CIT (Appeals). Before the CIT (Appeals), the assessee's representative contended that the reliance placed by the Assessing Officer on the Delhi High Court's decision in Modi Industries Ltd vs. Commissioner of Income-tax (200 ITR 329) is not correct and the said decision supports the assessee's case. It was also contended that 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 (Appeals), the Revenue filed an appeal before the Tribunal. The contentions raised by the rival parties were on the same lines as for the assessment years 1990-91 to 19 93-94. 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 Reserve Bank of India. 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 Income Tax Appellate 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 Assessing Officer demonstrated in detail as to how the sole selling agencies 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 Assessing Officer 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 the 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 Reserve Bank of India 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 Assessing Officer 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. Commissioner of Income-tax (200 ITR 329) wherein the decision of the appellate tribunal over ruling 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 is involved in the present appeal. The scope of Section 260-A of the Income Tax 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 Commissioner of Income Tax 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 is raised within the ambit of Section 260-A of the Income Tax 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.
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1.Commissioner of Income Tax-II,
2.The Income Tax Appellate Tribunal,
'D' Bench, Madras.
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