“Ritu Sanjay Toshniwal” Double Taxation Avoided

The assessee, an individual engaged in export and trading of paper products through a proprietary concern, claimed deduction of substantial foreign commission expenditure allegedly payable to M/s Shore Chem LLC, USA across multiple assessment years. Based on information received from US tax authorities through the Exchange of Information mechanism under the India-US DTAA, the Revenue concluded that the foreign entity neither rendered services to the assessee nor had any receivable income from the assessee.

The Assessing Officer disallowed the commission expenditure after finding absence of credible agreements, invoices, supporting correspondence, proof of services, or statutory compliance regarding foreign remittances. The appellate authorities affirmed the disallowance, and the Tribunal also upheld the finding that the expenditure lacked genuineness and failed the requirements of Section 37(1).

However, the Tribunal separately examined the assessee’s alternative plea that the aggregate commission liability of approximately Rs. 4.94 crores had subsequently been written back in Assessment Year 2013-14 and offered to tax under the head “amount no more payable write back.” Since the Revenue had already accepted taxation of such write-back in AY 2013-14, the Tribunal held that sustaining full disallowance in earlier years would result in impermissible double taxation of the same income. Accordingly, while affirming the disallowance on merits, the Tribunal directed corresponding reduction of additions to the extent amounts were already taxed in AY 2013-14.