2024 (4) TMI 738 - AT - Income Tax

Addition of commission expenses and franking charges - Allowable business expenditure or not? - HELD THAT - From a perusal of it is noted that the assessee had furnished the details of the parties to whom the franking charge has been incurred by assessee (on behalf of the customers). However no other evidences have been filed by assessee to prove that franking charges have been incurred wholly and exclusively for the purpose of business CIT(A) confirmed the action of AO. On the same reason the action of Ld. CIT(A) confirming the action of AO disallowing same is confirmed. Therefore issue regarding commission payment is restored back to the file of the AO for verification and the assessee to submit the relevant evidences as stated and the AO to pass order in accordance to law after hearing the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved: Appeal against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi for AY. 2018-19 regarding additions of commission expenses and franking charges.

Commission Expenses Issue: The assessee, engaged in arranging finance, claimed commission expenses of Rs. 44,36,581/- and franking charges of Rs. 4,25,176%. The AO disallowed these expenses as the assessee failed to provide evidence of services rendered by the parties to whom the commission was paid. The Ld. CIT(A) upheld the AO's decision. The appellant contended that detailed information of the commission agents was provided, along with payment evidence, and argued that the commission expenses should be allowed as business expenditure. The ITAT directed the AO to verify the services rendered by the commission agents and their income disclosure, and if satisfied, allow the commission expenses.

Franking Charges Issue: The AO disallowed the franking charges incurred by the assessee as no evidence was provided to prove that the charges were borne by the assessee for business purposes. The Ld. CIT(A) confirmed this decision. The ITAT upheld the disallowance of franking charges, as the assessee failed to provide sufficient evidence to support the business purpose of the charges.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the commission payment issue was remanded back to the AO for verification based on the provided evidence.