2021 (3) TMI 269 - AT - Income Tax

Deduction on account of sub-brokerage paid u/s 37 - Allowable business expenditure or not? - HELD THAT - A.O. in the entire assessment order did not mention any details of the search conducted in the case of Shri Praveen Agarwal. The A.O. did not mention anything in the assessment order as to how the statement of Shri Praveen Agarwal was incriminating in nature against the assessee. Whatever documentary evidence was produced by the assessee before A.O. have not been doubted by the A.O. and no enquiry on the same have conducted by the A.O. Thus, its stand established that assessee being engaged in business of real estate has engaged M/s. Taral Vincom Pvt. Ltd., as sub-broker. The assessee paid the impugned amount to the sub-broker against Bill and copy of the ledger account of the sub-broker is filed before A.O. The impugned amount is paid through banking channel on which TDS has also been deducted. The assessee filed details to show that for how much deals, sub-broker has worked for the business of assessee which were noted in the assessment order. All these documentary evidences have not been doubted by the A.O, therefore, assessee has been able to prove that the impugned amount have been incurred wholly and exclusively for the purpose of business of assessee. A.O. did not bring any evidence on record to dispute the correctness of the documentary evidences filed by the assessee on record. The A.O. merely following the information received from the search of Shri Praveen Agarwal, disbelieved the explanation of assessee, but, such fact cannot be read in evidence against the assessee. The details of ledger account show that assessee has regular business with M/s. Taral Vincom Pvt. Ltd., which is supported by the activities conducted by them. The bills issued by assessee and copy of bills issued by M/s. Taral Vincom Pvt. Ltd., show complete details as to for which property the transactions have been conducted by the sub-brokerage, for which commission have been paid to M/s. Taral Vincom Pvt. Ltd. The documentary evidences on record clearly suggest that assessee entered into the genuine business activities with the sub-broker and sub-broker rendered services for the business activity of the assessee. In the Group Case the Ld. CIT(A) has already deleted the similar addition finding the commission payment made to the same sub-broker as genuine - Decided against revenue.

Summary

Issues:
Challenge to deletion of addition for sub-brokerage/commission under section 37 of the I.T. Act, 1961.

Detailed Analysis:

Issue 1: Addition of Sub-Brokerage/Commission
- The Revenue challenged the deletion of an addition of ?1,58,91,312 paid to M/s. Taral Vincom Pvt. Ltd. as sub-brokerage/commission under section 37 of the I.T. Act, 1961 for A.Y. 2008-2009.
- The Assessing Officer (A.O.) observed that the payment was made to M/s. Taral Vincom Pvt. Ltd. and asked for details. The assessee explained the payment was for sub-brokerage in real estate business, supported by banking transactions and TDS deductions.
- The A.O. disallowed the amount based on information from a search in another case, despite the assessee providing evidence of genuine transactions and relying on relevant court judgments.
- The assessee appealed to the Ld. CIT(A), presenting detailed submissions and evidence showing the payment was legitimate and for business purposes.
- The Ld. CIT(A) examined the documents, including ledger accounts and bills, and found the payment to be allowable under section 37(1) of the Act. The Ld. CIT(A) deleted the addition, emphasizing the lack of evidence to prove the transaction was bogus.
- The Revenue's arguments were based on the A.O.'s order, while the assessee highlighted the deletion of a similar addition in a group company's case involving the same sub-broker.
- The Tribunal noted that the A.O. did not provide substantial evidence to dispute the genuineness of the transactions, and the assessee's evidence remained unchallenged.
- The Tribunal upheld the Ld. CIT(A)'s decision, stating that the assessee had declared substantial income, and the evidence presented supported the legitimacy of the sub-brokerage payment.
- The Tribunal dismissed the Revenue's appeal, concluding that there was no justification to interfere with the Ld. CIT(A)'s order based on the evidence and circumstances presented.

This detailed analysis covers the challenge to the deletion of the addition for sub-brokerage/commission under section 37 of the I.T. Act, 1961, providing a comprehensive understanding of the judgment and the arguments presented by both parties.