2010 (12) TMI 725 - AT - Income Tax

TDS - commission paid to the persons who have introduced customers to him - applicability of section 194H - Held that it is stated by the learned DR that since no such explanation was furnished before the Assessing Officer, it would be in the interest of justice, if the entire matter is set aside to the file of the Assessing Officer for re-examination of the case afresh Traveling expenses - The Assessing Officer was of the opinion that there was no business purpose for traveling to Mumbai - It was explained by the learned counsel that the assessee is a share broker and not only the office of the SEBI, Stock Exchange is at Mumbai, but most of the well known brokers are also in Mumbai - He submitted that the disallowance made purely on assumption may be deleted - Decided in favour of assessee. RF connectivity charges - the assessee paid a sum of Rs.57,725/- to Shah Investor s Home Ltd. for obtaining RF connectivity - It is stated by the learned counsel that, if any capital asset is created, it is of Shah Investor s Home Ltd. So far as the assessee is concerned, it has not created any capital assets, it only acquired right of connectivity for which payment was made. Since no capital asset was acquired by the assessee, so far as the assessee is concerned, it was revenue expenditure - Decided in favour of assessee. Replacement of doors and other related expenses - Revenue expenditure or capital expenditure - Find that the Assessing Officer made disallowance on the ground that expenditure was for purchase of new furniture. He therefore disallowed the expenditure as capital expenditure - At the time of hearing, learned counsel was unable to controvert the finding recorded by the Assessing Officer - Decided against of assessee. Telephone expenses - Find that the Assessing Officer disallowed telephone expenditure on the ground that expenses were incurred for purchase of new telephone instrument, therefore, it was capital expenditure - At the time of hearing, no argument was raised to controvert the above finding - Hence, decided against of assessee. Business promotion expenses - The Assessing Officer has disallowed the claim of Rs.30,875/- being business promotion expenses on the ground that no details were furnished. However, at the time of hearing before us, it was explained by the learned counsel that complete details of business promotion expenditure was furnished before the Assessing Officer and the copy of the same is placed of the assessee s paper book - Hence, direct the assessee to again produce details before the Assessing Officer and also direct the Assessing Officer to examine those details and thereafter re-adjudicate the issue in accordance with law. interest u/s 234B and 234C - At the time of hearing, the learned counsel fairly admitted that the charging of interest is consequential - Therefore, direct the Assessing Officer to re-calculate the interest, after final determination of income.

Summary

Issues Involved:
1. Disallowance of commission expenses
2. Disallowance of traveling expenses
3. Disallowance of RF connectivity charges
4. Treatment of replacement expenses as capital expenditure
5. Treatment of telephone expenses as capital expenditure
6. Disallowance of business promotion expenses
7. Charging of interest under Section 234B and 234C

Issue 1: Disallowance of Commission Expenses:
The appeal concerned the disallowance of commission expenses amounting to Rs.10,47,301/- by the Assessing Officer. The Assessing Officer disallowed the commission on the grounds that the assessee failed to produce details about the agents, the appointment of agents would amount to sub-franchisee, and the assessee failed to deduct tax as required under Section 194(h). The counsel argued that complete details were furnished, citing replies and a chart provided to the Commissioner of Income Tax (Appeals). The counsel also referenced a similar case decided by ITAT, Ahmedabad Benches, where commission disallowance was deleted. The Tribunal set aside the lower authorities' orders and directed the Assessing Officer to re-examine the issue with complete details and evidence provided by the assessee.

Issue 2: Disallowance of Traveling Expenses:
The Assessing Officer disallowed Rs.34,459/- of traveling expenses, stating there was no business purpose for traveling to Mumbai. The counsel argued that Mumbai housed SEBI, Stock Exchange, and prominent brokers, justifying the expenditure. The Tribunal found the disallowance was based on presumption and deleted it.

Issue 3: Disallowance of RF Connectivity Charges:
A disallowance of Rs.57,725/- for RF connectivity charges was challenged, with the Assessing Officer treating it as capital expenditure. The counsel contended that no capital asset was acquired, and the expenditure was for business purposes. The Tribunal agreed that no capital asset was created by the assessee and deleted the disallowance.

Issue 4: Replacement Expenses as Capital Expenditure:
The Assessing Officer disallowed Rs.15,000/- for replacement of doors, considering it capital expenditure. The Tribunal confirmed the disallowance as the counsel failed to challenge the Assessing Officer's findings.

Issue 5: Telephone Expenses as Capital Expenditure:
Rs.7,802/- out of total telephone expenses was disallowed by the Assessing Officer for purchasing a new telephone instrument. No arguments were raised against this finding, leading the Tribunal to reject the appeal.

Issue 6: Disallowance of Business Promotion Expenses:
Business promotion expenses of Rs.30,875/- were disallowed due to lack of details. The counsel argued that complete details were provided, leading the Tribunal to set aside the lower authorities' orders and direct a re-examination by the Assessing Officer.

Issue 7: Charging of Interest under Section 234B and 234C:
The counsel admitted that the charging of interest was consequential, and the Tribunal directed the Assessing Officer to re-calculate the interest after final income determination. The Tribunal partly allowed the appeal, pronouncing the order on 16.12.2010.