2006 (12) TMI 260 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 55 lacs out of brokerage expenses.
2. Deletion of disallowance made under rule 6B.

Summary:

1. Deletion of disallowance of Rs. 55 lacs out of brokerage expenses:

The Revenue appealed against the order of the CIT(A) deleting a disallowance of Rs. 55 lacs out of brokerage expenses. The assessee, a share broker, had paid sub-brokerage of Rs. 65,99,474 out of total brokerage earned of Rs. 1,52,17,036. The Assessing Officer (AO) doubted the genuineness of sub-brokerage payments to three concerns and denied the deduction, citing that the parties were not found at the given addresses and one sub-broker, Mr. Ketan Mehta, admitted to not rendering any services. The CIT(A) deleted the addition, noting that payments were made through normal banking channels, the sub-broker confirmed receipt, and the expenses were incurred to expand the business. The Tribunal upheld the CIT(A)'s decision, emphasizing that the identity of the payee was established, the payments were made through banking channels, and the assessee's business had significantly grown, indicating the expenses were genuine and necessary for business expansion.

2. Deletion of disallowance made under rule 6B:

The AO disallowed expenses under rule 6B, which the CIT(A) deleted, noting that the articles gifted by the assessee did not bear the logo and thus could not be treated as advertisement expenses. The Tribunal upheld the CIT(A)'s decision, citing the Jurisdictional High Court's decision in CIT v. Allana Sons (P.) Ltd. [1995] 216 ITR 690 (Bom.).

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of disallowances on both issues.