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3. In order to deal with the appeal we have set out separately, the essential facts pertaining to each issue raised in the appeal. Export Commission

4. On 05.06.1990 a collaboration agreement was executed between Guardian International Corporation, USA, (in short 'GIC') Modi Rubber (I) Limited, and Gujarat Alkalies and Chemicals Ltd. Consequent thereto, the assessee was incorporated as a joint venture between GIC, Modi Rubber (I) Limited, M/s Gujarat Mineral Development Corpn. Ltd and Gujarat Alkalies and Chemicals Ltd. GIC with 50% stake in the equity of the assessee was the major shareholder. The State Government through Public Sector Undertakings jointly held a stake equivalent to 9.46% of the total equity of the assessee. It is not disputed that both the purpose and object of entering into the aforementioned collaboration agreement and thereafter incorporation of the assessee, was to manufacture float glass in India.

6. It is in this background that the assessee set up its plant which commenced commercial production on 01.03.1993.

7. At this stage it would be important to note two other aspects on which the Assessing Officer, as well as the Revenue, have laid great stress, which is, that as per the collaboration agreement dated 05.06.1990 the assessee was required to pay royalty to GIC at the rate of 3% on domestic sales and 4% on foreign sales. It seems that the financial institutions in India had an objection to the clause on payment of Royalty, which stood incorporated in the collaboration agreement. The financial institutions were of the view that the obligation of the assessee to pay royalty to GIC must necessarily be subordinate to its obligation to pay instalments, interest and other charges under the loan agreements executed by the assessee with the financial institutions. In order to meet the concerns of the financial institutions the assessee gave an undertaking on the aforementioned broad terms vide letter dated 27.02.1993, which inter alia, subordinated the interest of GIC, with respect to, its right to receive royalty to that of, the financial Institutions right to receive their dues under the loan agreements.

observed that, in view of the explanation of the assessee, that the exports had to be made at the price prevailing in the international market even if it was less than the cost of production keeping in mind that the domestic demand for float glass in the country was low and the inventory with the assessee was piling, the said objection had no merit. As regards the second objection of the Assessing Officer that GGE had not rendered any service the CIT(A) noted; the fact that the collaboration agreement which was executed prior in point of time to the Export Sales Agency Agreement, itself provided for appointment of an agent for the purposes of carrying out exports. The agent under the collaboration agreement could have been the foreign collaborator itself i.e., GIC or any of its affiliates. The said foreign collaboration agreement also provided for payment of commission to such an agent albeit at the rate of 5% which had the approval of Government of India. The CIT(A) also returned a finding that there had been a promotion of exports which was amply demonstrated by the fact that the assessee had achieved an export turnover of Rs 90 crores; the details with respect to which had been supplied by the assessee. The CIT(A) was thus of the view that there was no justification for disallowance of the entire commission, however, she restricted the allowable agency commission to the rate of 5%. The CIT(A) was of the view that assessee had failed to establish by adverting to evidence that payment of commission at the rate of 12.5% is reasonable. In this regard the CIT(A) sustained the view of the Assessing Officer, insofar as, he had taken resort to Section 40A(2) and Section 92 of the Act to the extent of restricting the commission to 5% as against 12.5% claimed by the assessee.

11. Having perused the orders of the Tribunal, we do not find that findings returned on the said issue are perverse. The point to be noted is that the Assessing Officer in respect of the present issue was largely swayed by the fact that in order to get over the impediment created by the financial institutions with respect to the payment of royalty, by seeking an undertaking from the assessee that royalty will not be paid till such time the assessee's obligation to make payments towards principal, interest and other charges under the loan agreement are irregular, was sought to be circumvented by entering into an Export Agency Sales Agreement in July, 1993 by enhancing the agency commission from 5% to 12.5%. As has been rightly noted by the CIT(A), as well as, the Tribunal in the collaboration agreement dated 05.06.1990, there was a subsisting provision for appointment of an agent, to facilitate exports by the assessee. The agent as per the collaboration agreement could have been either the foreign collaborator itself i.e., GIC or its affiliate. Furthermore, the collaboration agreement provided for payment of agency commission at the rate of 5%. Therefore, it is quite evident that the appointment of an agent by itself was not a device. The reasons given for enhancement of commission by the assessee, were broadly: that there was very little demand for float glass, at the relevant point in time, in the domestic market and hence, in order to recoup its losses the assessee chose to export the goods even though at a price which was less than the cost of production. In achieving this end the agent extended its assistance in various ways which the assessee in its wisdom felt ought to be compensated by enhancing the rate of commission are reasons which were accepted by the Tribunal on examination of evidence which demonstrated increase in export sales. Therefore, the Tribunal, in our view, rightly, disagreed with the conclusion of the CIT(A), which is, that while the assessee's stand that services had been rendered, was acceptable, however, in so far as the rate of commission was concerned it was to be allowed only to the extent 5%. The Tribunal's dis-agreement with this line of reasoning adopted by the CIT(A), was broadly on the ground, that once it is accepted that services have been rendered by the agent the discretion as to what commission has to be paid is a business decision of the assessee which cannot be interfered with unless there is evidence to show that it is unreasonable is, in our opinion the correct approach. 11.1 The Tribunal in the impugned judgment has returned a finding of that no evidence had been produced by the Revenue that the agency commission paid by the assessee at the rate of 12.5% was unreasonable. The Tribunal also noted that the Transfer Pricing Officer in the assessment years 2002-03, 2003-04, 2004-05 had accepted the percentage of agency commission paid by the assessee confirmed to the arms length price. 11.2 In view of the aforesaid findings and the reasoning adopted by the Tribunal, we find no fault with the conclusion arrived at by the Tribunal in the impugned judgment, which is, that there was no justification on the part of the CIT(A) in disallowing the claim of the assessee towards payment of commission over and above the rate of 5% by invoking Section 40A(2) or Section 92 of the Act. We concur with the view of the Tribunal. According to us no substantial question of law arises for our consideration.