SAWHNEY RUBBER INDUSTRIES Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF DELHI
SAWHNEY RUBBER INDUSTRIES PROP.
COMMISSIONER OF INCOME TAX NEW DELHI
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V.B.GUPTA, J. -
(1.) By this common judgment two appeals bearing No. ITA 821 and 824/2006 filed by the Assessee arising out of common order dated 16th December, 2005 passed by the Income Tax Appellate Tribunal (in short as 'Tribunal') in ITA No.5389/Del/94 ( assessment year 1991-92) and ITA No.7602/Del/95 (assessment year 1992-93) are being disposed of.
(2.) The Assessee is in the business of manufacturing of cycle tyres and tubes. The Assessing Officer on scrutiny of the Profit and Loss A/c of the Assessee noticed that the commission paid by the Assessee had increased to Rs.55,68,854/- from Rs.33,34,235/- in the last year. The Assessee was required to file details of the commission. It was found by the Assessing Officer that the Assessee paid substantial commission to two parties namely M/s Associates Agencies and M/s Sawhney Tyres @ 3% for the period from April, 1990 to September, 1991. Earlier the commission was paid @ 2% from May, 1988 to March, 1989 and it was increased to 2.5% from 1st April, 1989 till March, 1990. The total commission was paid to the tune of Rs.55,68,854/- on total sales of Rs.18,56,28,522/- which was @ 3% whereas for the previous year the commission was much less.
(3.) The Assessee was asked to explain and justify these payments of commission especially in view of the fact that they were increasing the rate of commission payable to these parties who were closely related to the Assessee because the partners of these firms were related to Assessee's wife being her brother and father.;
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