Saturday, 27 January 2018

ITAT : Deletes addition u/s 41(1) for commission overdue to Kuwaiti agent for over 1400 days

Mumbai ITAT deletes addition u/s. 41(1) [on account of cessation of trading liability] in case assessee-company (engaged in engineering, designing services for oil & gas industry) with respect to outstanding commission payable to its agent in Kuwait (‘creditor’) for AY 2011-12;  ITAT notes that assessee had entered into MoU with the creditor for procuring business for assessee in Kuwait, noting that the creditor did not make any request for clearance of commission of  Rs. 34.90 lakhs outstanding for more than 1460 days, AO made addition u/s. 41(1) treating it as liability ceased; Rejecting Revenue’s action, ITAT notes that under the MoU, commission was payable only on realization of proceeds from customers procured by agent, thus observes that the commission payable was outstanding as the agent could not recover sales proceeds from customer;  Holds that by withholding commission payments of agent with respect to overdue payment from its debtors, assessee has acted in a manner consistent with principles of commercial expediency and in accordance with the terms of MOU, thus remarks that “ … Revenue cannot direct assessee to act in a manner in defiance to the principles of commercial expediency and in turn to damage its own business interest.”;  Observes that assessee had also produced details of court cases at Kuwait and correspondences with its overseas buyers/agents with respect to its efforts for making recovery etc. to justify that the payments were still due from the customers:ITAT 

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