2007 (11) TMI 70 - HC - Income Tax

Brokerage charges paid by assessee to builder by cheques is not disputed and same is reflected in the IT return of recipient so deduction allowed amount paid as stamp duty was paid by purchaser proved in IT return so same is allowed to deduction.

Summary

Issues:
1. Whether the Tribunal was justified in holding that a payment made to a consultancy firm was not genuine and did not qualify for deduction under the Income-tax Act.
2. Whether the Tribunal was correct in finding that a payment made to a real estate group was not genuine as per a supplementary agreement.

Analysis:

Issue 1:
The case involved the assessment year 1991-92 where the assessee declared income and claimed deductions. The Assessing Officer disallowed a claim of brokerage paid to a consultancy firm, stating that no services were rendered. This decision was upheld by the Commissioner of Income-tax (Appeals) and the Appellate Tribunal. However, in penalty proceedings, it was accepted that the consultancy firm had reported the payment in their income-tax returns, which was also accepted by the Department. The High Court found that since the payment was made through a cheque and accepted by the consultancy firm as commission for services rendered, the authorities did not consider the case properly. The High Court noted that in penalty proceedings, the Tribunal had accepted the contention of the assessee regarding the payment. Therefore, the High Court allowed the appeal in part, holding that the payment of Rs. 4,50,000 as brokerage to the consultancy firm was genuine.

Issue 2:
Regarding the second question, it was found that the stamp duty had been paid by a real estate group, as reflected in their income-tax returns. The authorities below had also confirmed this fact. Therefore, the High Court held that based on these facts, they could not interfere with the findings of the authorities regarding the stamp duty payment. Consequently, the High Court answered question No. 2 against the assessee.

In conclusion, the High Court allowed the appeal in part, holding that the payment made to the consultancy firm was genuine and should qualify for deduction under the Income-tax Act. However, the Court upheld the decision regarding the payment made to the real estate group, stating that the stamp duty payment issue could not be interfered with based on the facts presented.