Commission paid to commission agents on the basis of sales is an allowable expenditure:

AO disallowed commission paid to the commission agents at a rate ranging between 3 to 5% which was partly deleted by Ld. CIT(A). On further appeal, Hon’ble ITAT observed that AO made the said disallowance on the general observations and had merely given the theory of commission allowable u/s 37. AO had not pointed out any specific instance on the basis of which such commission can be held to be bogus. The fact is that such commission was paid on the basis of sales made through such agents. Assessee had established the identity of such agents. Confirmation, ITRs, Balance-sheet, P&L a/c and bank statement of the payees were also furnished which proved that such payees had shown the concerned commission receipts as income. Such commission was paid either during the year under consideration or in the subsequent year. Assessee had even established the consistency of payment of such commission. No disallowance was made on account of such commission paid in earlier years. In light of the above, the said disallowance was fully deleted by the Hon’ble ITAT.

[M/s. Heatex Engineering Co. Pvt. Ltd. – DCIT – ITA Nos.2695 & 2752/Ahd/2012]