C/TAXAP/822/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 822 of 2019 PRINCIPAL COMMISSIONER OF INCOME TAX-4 Versus VISHAL ENGINEERING AND GALVANIZERS Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 13/01/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This tax appeal under Section 260A of Income Tax Act, 1961 [for short 'the Act, 1961'] is at instance of revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad Bench 'D', Ahmedabad dated 25/06/2019 in ITA No.2945/AHD/2015 for A.Y 2008 09. 2. revenue has proposed solitary question as substantial question of law involved in this tax appeal: Whether Appellate Tribunal has erred in law and on facts by deleting addition of Rs.20,08,977/ made on account of commission expense? 3. On proposed question of law, we first take notice of findings recorded by CIT (Appeals). Page 1 of 3 Downloaded on : Tue Jan 21 10:09:11 IST 2020 C/TAXAP/822/2019 ORDER I have considered facts of case and submissions of appellant. appellant has placed on record debit note cum confirmation of both commission agents which include details such as PAN as well as name and confirmation cum ledger of parties to whom sales have been made through such agents. arrangement between appellant and commission agents is such that commission agents are to provide details of potential customers as well as solicit orders. Such commission agents are also required to provide any other information, report or statement of account of customers as desired by appellant from time to time. However, no formal agreement has been reduced into writing to this effect. I am of view that merely not entering into such formal agreement cannot be ground for disallowing commission. Assessing Officer has further mentioned that no reply has been received from commission agents in response to certain details called for from them by Assessing Officer. I of view that fact that such commission agents did not reply to Assessing Officer cannot come in why of establishing fact that such agents have rendered their services to appellant. Also inaction at end of commission agents as to not replying to Assessing Officer cannot be ground for disallowing commission in hands of appellant since such commission agents are independent parties and appellant doesn't have any hold over them. In any case, since appellant had furnished PAN and other requisite details of such commission agents, it was open for Assessing Officer to call for such details from such commission agents u/s.133(6) or issue summons to such agents as well. However, nothing of that sort has been done by Assessing Officer. Hence, addition cannot be made even on that score. However, on perusal of documentary evidences furnished by appellant, it transpires that only service rendered by commission agents is that of introducing potential customers to appellant. In may opinion, mere introducing of potential customers doesn't fall with ambit of Service so as to make claim of commission eligible for deduction u/s.37 of Act. Hence, addition is hereby sustained. 4. appellate tribunal while dismissing appeal preferred by assessee observed as under: We have carefully considered judgment as cited above. It is settled principle of law that commission paid to persons for referring names of customers is allowable u/s.37 of Act for introducing potential customers to assessee falls within ambit of service. We thus find order passed by Learned CIT(A) not incoherence with ratio laid down by judgment as cited above. We thus delete addition. In result, assessee's appeal is allowed. Page 2 of 3 Downloaded on : Tue Jan 21 10:09:11 IST 2020 C/TAXAP/822/2019 ORDER 5. appellate tribunal took view that CIT (Appeals) ought not to have confirmed dis allowance only on ground that only service rendered by commission agents was that of introducing potential customers to assessee, which would not fall within ambit of Service so as to make claim of commission eligible for deduction under Section 37 of Act. tribunal takes view that commission paid to persons for referring names of customers, is allowable under Section 37 of Act for purpose of introducing potential customers to assessee and same would fall within ambit of Service . 6. We are in agreement with view taken by appellate tribunal as regards deduction available under Section 37 of Act. 7. In such circumstances referred to above, we are of view that proposed question cannot be termed as substantial question of law. 8. In result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) aruna Page 3 of 3 Downloaded on : Tue Jan 21 10:09:11 IST 2020 Principal Commissioner of Income-tax-4 v. Vishal Engineering And Galvanizer