Case Law Details
Mushtak Khan Vs ITO (ITAT Indore)
We observe that the assessee is into this business as stamp vendor since last many years and Appeal is against disallowance of commission expenditure claimed by the assessee to have been paid to various customers/registry consultants purchasing the stamp papers.
Now as far as the expenditure for commission of is concerned assessee’s claim is that the growth in this line of business solely depends on adopting commercial trade practice and to follow the system prevalent in this line of business of selling the stamp papers with requires that in order to retain and attract the customers, commission/discount to be passed on to customers and clients through registry consultants, since these professionals are the back bone limbs of this business. Ld. Counsel for the assessee also pleaded before us that the licencing rules does not prohibit the vendor to lower the stamps face value, however sale of stamps above the face is prohibited and complete records of stamp purchased and sold are maintained.
Now before us two facts are placed. On one hand the assessee has placed all financial statements, stamp sale registers showing the claim of commission expenditure along with financial statements, income tax returns, affidavits of various registry consultants and also showing the register entering date wise entry of commission paid as and when the stamps are sold. On the other hand the only allegation made by the Ld. A.O is that the claim of commission is not supported by any documentary evidence. It is true that each and every entry of commission payment the assessee has not provided the details and the same seems to be impractical because the entries of commission payment are multiple times in a day and it is not practically possible to take a receipt from each and every person who may be either a registry consultants or the customer actually using the stamp for himself. However one cannot deny the fact that the person who is coming to purchase the stamp from a stamp vendor is conscious of the fact that the stamp vendors are earning some commission/income from sale of stamp paper. There being multiple stamp vendors, the customer has a liberty/option to purchase stamp paper from the stamp vendor who gives maximum commission or parts with maximum profits embedded in the stamp value. One of the well known business principle is that for increasing the gross revenue the profit margin needs to be reduced and same seems to be the situation of the assessee.
We therefore in the given facts and circumstances of the case and being fair to both the parties are of the considered view that out of the total disallowance of Rs. 12,24,600/-, disallowance of commission to the extent of 25% i.e. at Rs. 3,06,150/- shall be justified to cover the deficiency of not maintaining necessary vouchers and acknowledgement receipts at the end of the assessee for paying commission to the persons purchasing the stamp from him. We accordingly order so and set aside the finding of both the lower authorities and partly allow assessee’s appeal by sustaining disallowance of commission expenditure at Rs. 3,06,150/-.
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