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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