2023 (12) TMI 348 - HC - Income Tax

Allowable business expenses - Supervisory and risk management expenses - addition made expenses were not incurred by the respondent/assessee for its business purposes - CIT(A) deleted addition - HELD THAT - The record shows that the assessee is in the insurance brokerage business concerning both life and non-life products offered by various insurance companies. Assessee is said to have incurred, according to the stand taken before the AO, the aforementioned amount vis- -vis prospective clients. Concededly the said amount was paid by the respondent/assessee to its sister concerns, namely M.M. Carpets Industries Ltd. and Trinity Global Enterprises Ltd. The fact that the expenses were incurred for prospective clients should be good enough for the respondent/assessee to claim deduction qua the same, as every expense does not necessarily translate into corresponding income. Since, as noticed above, the appellant/revenue has treated the amount expended by the respondent/assessee as revenue receipt in the hands of its sister concerns, in our opinion, the same transaction cannot be treated differently in the hands of payer i.e., respondent/assessee. Besides, as noted above, in AY 2010-11, the AO had allowed deduction vis- -vis amounts expended towards supervisory and risk management charges. CIT(A), in AY 2013-14, as noticed above, had deleted the addition made by the AO. Thus, we are not inclined to interfere with the impugned order, since, according to us, no substantial question of law arises for our consideration.

Summary

Issues involved:
1. Condonation of delay in re-filing the appeal.
2. Deletion of addition made by the Assessing Officer pertaining to supervisory and risk management expenses.

Condonation of delay in re-filing the appeal:
An application was moved seeking condonation of a 448-day delay in re-filing the appeal. The delay being in re-filing, and with an intention to deal with the matter on merits, the delay was condoned. The prayer in the application was allowed, and the application was disposed of accordingly.

Deletion of addition made by the Assessing Officer:
The appeal concerned the Assessment Year 2011-12 and aimed to challenge the order passed by the Income Tax Appellate Tribunal regarding the deletion of an addition made by the Assessing Officer for supervisory and risk management expenses. The Commissioner of Income Tax Appeals had deleted the addition, a decision upheld by the Tribunal. The appellant/revenue contended that the deletion of the addition was flawed as the expenses were not incurred for business purposes. The respondent/assessee had paid amounts to its sister concerns for supervisory and risk management, which were claimed as expenses against brokerage income. The Court found the appellant's argument untenable, stating that expenses incurred for prospective clients should be deductible, even if they do not directly result in income. Considering past instances where similar deductions were allowed, the Court declined to interfere with the impugned order, as no substantial question of law arose for consideration. The appeal was closed, and the judgment was to be dispatched to the respondent/assessee.