Income Tax Appellate Tribunal - Delhi
Electra (Jaipur) (P.) Ltd. vs Inspecting Assistant Commissioner on 15 December, 1987
Equivalent citations: [1988]26ITD236(DELHI)
ORDER
G. Krishnamurthy, President
1. This [is a case where the issue involved is whether the payment of commission by the asses-see for what was described as procurement of business could be allowed as a deduction in computing the income of the assessee for the assessment year 1982-83.
2. The assessee is a private limited company located at Jaipur in the Industrial Area manufacturing Transformers of different kVA. During the year it supplied mostly to Rajasthan State Electricity Board and also to Punjab State Electricity Board. The supplies made to Punjab State Electricity Board were 302 transformers of 63 kVA as against 240 transformers to Rajasthan State Electricity Board. The total turnover was of the region of Rs. 53,25,000 as against Rs. 1,10,83,000 in the immediately preceding assessment year. Though there was a steep fall in turnover, the assessee claimed that it had to pay a commission of Rs. 30,000 to one Shri Vineet Mehta to procure orders from Punjab State Electricity Board. The claim of the assessee before the Inspecting Asstt. Commissioner was that the services of Vineet Mehta were utilised in procuring orders from Punjab State Electricity Board where to get orders was subject to very keen competition. The Inspecting Asstt. Commissioner noted that though Punjab State Electricity Board had given some contracts to the assessee for the supply of transformers, there was nothing to show that it was on account of the efforts of Shri Vineet Mehta but as a result of accepting of universal tender by it. The view-point of the Inspecting Asstt. Commissioner was that Punjab State Electricity Board being a Government body having floated tenders, Shri Vineet Mehta could not have any hand in helping to get those contracts settled in favour of the assessee because intervention at that stage was unthinkable. More than that he relied on the fact that the assessee was not able to produce any receipt issued by Shri Vineet Mehta in proof of the receipt of commission. Thus, according to him, when the payment was not verifiable, services not proved, the amount could not be allowed as a deduction.
3. On appeal, the Commissioner (A) confirmed the order of the Inspecting Asstt. Commissioner substantially agreeing with him. The Commissioner (A) further mentioned that the assessee was required to establish that the expenditure was incurred wholly and exclusively for the purpose of the business and as the assessee has failed in this direction, he was not entitled to the deduction. The appeal is now filed before the Tribunal against the order of the Commissioner (A) and the point taken up on behalf of the assessee before us was that the payment of commission was an usual thing in this line of business and these contracts are generally awarded by the authorities of the Electricity Boards to those persons, whom they know, by which they would be able to come to firm conclusions as to the quality of the goods and capacity of the supplier and adherence to time schedules these things are more important if not as important as the price and other specifications mentioned in the tenders. It is, therefore, incorrect to state that it is only the tenders that would get the business for the assessee and not any personal effort. Payment of commission was made in the earlier years and was allowed to others. There was therefore nothing new in this. The assessee could not produce the receipt earlier. He has now produced some papers before us to show that by a letter issued on 16-10-1981 the assessee-company appointed Shri Vineet Mehta of Sarojini Marg, 'C' Scheme, Jaipur as their Liaison Officer agreeing to pay a total commission of 0.1 per cent of the total value of the orders placed through him and this appointment was only with regard to procurement of orders from Punjab State Electricity Board and this order clearly provided that Shri Vineet Mehta has to negotiate with the officials of the Punjab State Electricity Board with regard to tender price and also arrange for the inspection of the materials supplied and release of the payments. Then there was a receipt issued by Shri Vineet Mehta of having received commission. Relying upon this evidence, the learned advocate pointed out that the payment of commission should not have been disallowed. He farther pointed out that the entire payment was not made to Shri Vineet Mehta but a major portion was paid to Shri Harbans Singh by cheque on 25-10-1980 and Shri Harbans Singh also helped in procuring the orders from the Punjab State Electricity Board. Although the mention of Shri Vineet Mehta was made by the authorities below, in actuality the commission was paid to both of them put together amounting to Rs. 30,000.
4. The learned Departmental Representative contended that this evidence was new and was never produced before the authorities below and should not now be permitted to be produced and in any case the assessee having failed to prove the need and the payment of commission, not entitled to claim for its deduction and the authorities below were right in rejecting the assessee's claim.
5. After going through the evidence placed before us, considering the facts of this case and going through the orders of the authorities below, we are of the view that the assessee should not be disqualified from producing this evidence merely on the ground that the evidence was not placed before the authorities below. The sole purpose of judiciary as well as of the revenue is to get at the truth. If the truth is that the payment of commission was genuine and was dictated by the business needs, such a payment should not be disallowed merely on the ground that the assessee was unable to lead proper evidence or on the ground that the evidence led was of such a nature as to create a very high degree of suspicion. There should be no objection to consider any evidence produced to test its authenticity relevance and then to act on it. If the evidence is genuine, reliable, proves the assessee's case, then the assessee should not be denied the opportunity. But on the other hand, if the evidence led turns out to be spurious, fabricated or of irrelevant nature, such consequences as are provided for under the law will ensue. It is therefore incorrect to shut out an assessee in the process of administration of justice from leading evidence to prove its case. The earlier inability to lead evidence should not be held against the assessee unless it is known to the Court or suggested to the Court or there was evidence to suspect that the evidence was fabricated. There is no such suggestion in this case. We are therefore of the opinion that the request of the learned counsel of the assessee is reasonable and that the request made by the department for the refusal of its admission is not proper. We therefore admit the evidence, direct the Commissioner (A) to examine it thoroughly and then arrive at the conclusion afresh whether the payment of the commission could be allowed or not. At this stage we wish to record a suggestion made to us that the total value of the contracts obtained from Punjab State Electricity Board was of the order of Rs. 1.31 crores, the highest ever order obtained and although the supplies made in the year were to the tune of Rs. 29 lakhs, the balance of the orders were executed in the subsequent years. With the procurement of orders from Punjab State Electricity Board, it was pointed out that the supplies to Rajasthan State Electricity Board got diminished. The Commissioner (A) will bear these facts in mind and assess their relevance in coming to the fresh conclusion as to whether the claim for the deduction of the commission could be accepted.
6. In the result, the appeal is allowed for statistical purposes.