COMMISSIONER OF INCOME TAX MADURAI Vs. SIVA SPRINGS

JUDGEMENT

(1.) THE above tax case appeals are directed against the common order of the Income-tax Appellate Tribunal dated 5.8.2005 in ITA Nos.968 to 975/Mds/1999 for the assessment years 1986-87 to 1993-94 respectively.

(2.) THE Revenue is the appellant. THE relevant assessment years are 1986-87 to 1993-94. THE assessee claimed deduction on account of payment to one Balaji Siva, a sister concern towards packing and forwarding charges. During the re-assessment under Section 147 of the Income-tax Act (for brevity "the Act"), the Assessing Officer found that Balaji Siva was not an individual, but a unit of Balaji Barium Products Private Limited and its Managing Director is also related to all the partners of the assessee firm and on that ground, he came to the conclusion that the amount had been paid by the assessee firm not for any real services rendered by the said Balaji Siva, but to reduce the profits of the assessee firm, the assessee had set it off against the accumulated losses of Balaji Siva and accordingly, disallowed the payment of commission in respect of the assessment years 1986-87 to 1993-94 by even dated orders dated 27.3.1998. Against the said assessment orders dated 27.3.1998, the assessee preferred appeals before the Commissioner of Income-Tax (Appeals), who by common order dated 26.2.1999 found that the sister concern had rendered the services and therefore the commission paid by the assessee firm to the sister concern ought to have been allowed, but, since there is close relationship between the Managing Director of the sister concern and the partners of the assessee firm, only 10% of the payment was treated as excessive and allowed 90% of the payment. Against that order, the Revenue preferred further appeals before the Income-tax Appellate Tribunal. THE Appellate Tribunal following its earlier order with respect to the assessment year 1994-95 in the assessee's own case, which remain unchallenged and therefore become final, dismissed the appeals.