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2011 (3) TMI 1615 - AT - Income TaxDisallowance of brokerage and commission Whether Ld. CIT(A) erred in deleting the disallowance of brokerage and commission expenses made by the A.O? - HELD THAT - There are no infirmity in the impugned order of the learned CIT(A) deleting the ad hoc disallowance of 10% made by the Assessing Officer out of commission and brokerage expenses claimed by the assessee. If the nature of the business of the assessee is taken into consideration, there was no reason to doubt the genuineness of the expenses incurred by the assessee on payment of brokerage and commission. As a matter of fact, even the Assessing Officer did not dispute this position and allowed 90% of the brokerage and commission expenses claimed by the assessee. He, however, disallowed the balance 10% of the expenses on the ground that complete details thereof were not furnished by the assessee - There is also nothing brought on by the Assessing Officer to show that the commission and brokerage expenses claimed by the assessee were excessive and unreasonable. The disallowance of 10% made by the Assessing Officer out of commission and brokerage expenses thus was not sustainable and the learned CIT(A) was fully justified in deleting the said disallowance. The impugned order of the learned CIT(A) is upheld on this issue. Disallowance of professional fees Whether Ld. CIT(A) erred in deleting the disallowance of professional fees expenses made by the A.O? - HELD THAT - It is observed that complete details of the payments made by the assessee on account of professional fees amounting to ₹ 8,90,000/- were furnished by the assessee along with invoices and receipts issued by the concerned payees as found by the learned CIT(A) from the relevant assessment records. As further found by the learned CIT(A), there was no discrepancy whatsoever, which was pointed out by the Assessing Officer in the said details and evidences filed by the assessee in support of its claim for professional fees of ₹ 8,900,000/- paid to two parties - the learned Departmental Representative has not been able to rebut/controvert these findings of fact recorded by the learned CIT(A) and this being so, there are found no justifiable reason to interfere with the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer out of professional fees holding that the same was not well founded - appeal of Revenue on this ground dismissed. Disallowance of loss on account of auction bidding made by the A.O. Whether Ld. CIT(A) erred in deleting the disallowance towards loss on account of auction bidding made by the A.O. as not having incurred wholly and exclusively for business purpose? - HELD THAT - It is observed that the main business of the assessee is that of making investment and trading in shares and securities. The loss claimed to be incurred by the assessee on account of auction bidding was related to purchase of property and although it was submitted before the Assessing Officer during the course of assessment proceedings that the assessee company was planning to do property related business, neither the Assessing Officer nor the learned CIT(A)has given any finding on this aspect which is relevant - The Learned CIT(A), was not correct to say that there was no reason given by the Assessing officer to disallow the loss claimed by the assessee in auction bidding. It is pertinent to ascertain as to whether the assessee was also engaged in he property related business so as to consider the allowability of its claim for loss on auction bidding and since neither the Assessing Officer nor the Learned CIT(A) has gone into this aspect, this issue is restored to the file of the Assessing Officer for deciding the same afresh after verifying this relevant aspect. Ground No. 3 of the Revenue s appeal is accordingly treated as allowed. Disallowance of Dividend Income Whether Ld.CIT(A) erred in confirming the disallowance to the extent of 3% of dividend income, u/s.14A of the Act holding that 3% of the dividend income is disallowable u.s.14A of the Act, which is without any reasonable basis? - HELD THAT - It is observed that in its recent judgment delivered in the case of GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER 2010 (8) TMI 77 - BOMBAY HIGH COURT , the Hon ble Bombay High Court has held that Rule 8D of the Income-tax Rules 1962 is applicable only prospectively that is from the assessment year 2008-09 and the quantum of disallowance u/s.14A for the years earlier to assessment year 2008-09 has to be worked out by adopting some reasonable method. As rightly pointed out by the learned Departmental Representative in this regard, the Learned CIT(A) has not given any basis to show that the disallowance sustained by him to the extent of 3% of the dividend income is reasonable - the impugned order on this issue is set aside - matter restored to the file of the Assessing Officer with direction to decide the same afresh in the light of the decision of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. The appeal of the revenue is treated as partly allowed for statistical purposes.
Issues:
1. Disallowance of brokerage and commission expenses 2. Disallowance of professional fees expenses 3. Disallowance of loss on account of auction bidding 4. Disallowance under section 14A Issue 1: Disallowance of Brokerage and Commission Expenses: The Revenue appealed against the deletion of a disallowance of brokerage and commission expenses made by the Assessing Officer. The CIT(A) deleted the ad hoc disallowance of 10% as the details provided by the assessee were found to be complete, and the nature of the business justified the expenses. The ITAT upheld the CIT(A)'s decision, stating that there was no reason to doubt the genuineness of the expenses, and the disallowance was not sustainable without proper basis. Issue 2: Disallowance of Professional Fees Expenses: The Revenue challenged the deletion of a disallowance of professional fees expenses by the CIT(A). The Assessing Officer disallowed the expenses due to incomplete details provided by the assessee. However, the CIT(A) found that complete details were furnished, and no discrepancy was pointed out by the Assessing Officer. The ITAT upheld the CIT(A)'s decision, stating that there was no valid reason to interfere with the deletion of the disallowance. Issue 3: Disallowance of Loss on Account of Auction Bidding: The Revenue contested the allowance of a claim for loss on auction bidding by the CIT(A). The Assessing Officer disallowed the loss, stating it was not related to the assessee's main business of investment and trading in shares and securities. The CIT(A) allowed the claim, but the ITAT found that the business aspect of property-related activities was not adequately addressed. The issue was remanded to the Assessing Officer for further examination. Issue 4: Disallowance under Section 14A: The Revenue challenged the disallowance under section 14A related to dividend income earned by the assessee. The Assessing Officer disallowed a portion of expenses attributable to the exempt income, which the CIT(A) upheld at 3% of the dividend income. The ITAT set aside the CIT(A)'s decision, citing the need for a reasonable method of calculation and directed the Assessing Officer to reevaluate the disallowance in line with a recent judgment. The issue of interest expenditure was also highlighted for consideration. In conclusion, the ITAT partially allowed the Revenue's appeal for statistical purposes, addressing each issue comprehensively and providing detailed analysis of the judgment.
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