Disallowance cannot be made by only giving weight age to nomenclature and without seeing real purpose for payment

Abhijit Majumder Vs. ITO (ITAT Kolkata)

In order to ascertain the exact nature of the amount in question paid by the assessee to Hawkers, it is necessary to consider the modus operandi of the business of the assessee as well as the functions performed by the assessee and the Hawkers in the course of the business. In this regard, it is observed that the assessee is in the business of trading in newspapers and magazines and this position is accepted even by the assessing officer in the assessment order.

The assessee thus purchases the newspapers and magazines from Aananda Bazar Patrika and supplies the same to Hawkers for further sale to the customers. The function mainly performed by the Hawkers thus is to deliver the newspapers and magazines supplied by the assessee to the customers and for these services, the Hawkers are compensated by the assessee by charging a discounted price of the newspapers and magazines. The supply or delivery of newspapers and magazines is made by the Hawkers to the customers on their own and there is nothing brought on record by the authorities below to show that such sale or supply was made by the Hawkers to the customers on behalf of the assessee as an agent.

The Hawkers generally operate in an unorganized manner and the only compensation which they get for supply or delivery of the newspapers is the cash discount that the assessee offers to them on the printed price of the newspapers and magazines. Their business activities involving supply or delivery of newspapers and magazines are done by the Hawkers on their own and there is nothing on record to show that the same are done by them on behalf of the assessee as agent.

Having regard to all these aspects concerning the modus operandi of the assessee’ s business as well as the functions performed by the Hawkers, I am of the view that the amount in question paid by the assessee to the Hawkers is in the nature of discount and the same cannot be treated as commission merely on the basis of nomenclature used by the assessee in his books of account.

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