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TMI Blog2011 (8) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... that that there was no justification for treating the said income as business income - Revenue did not place any material before us in order to controvert these findings of facts recorded by the ld. CIT(A) nor placed any such material, evidencing that the assessee was carrying on the business of trading in shares, so as to enable us to take a different view in the matter - Decided in favour of assessee. - ITA No. 1877/Ahd/2009 - - - Dated:- 12-8-2011 - Mukul Shrawat, A.N. Pahuja, JJ. G.S. Sooryawanshi, DR, for the Appellant Mukesh M. Patel, AR, for the Respondent ORDER A.N. Pahuja: This appeal by Revenue against an order dated 31-03-2009 of the ld. CIT(Appeals) -XIV, Ahmedabad, for the Assessment Year 2006-07, raises the following grounds:- "[1] The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.18,26,800/- being expenses of commission and brokerage. [2] The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.9,97,260/- out of Keyman Insurance Premium. [3] The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of incentive payment of Rs.1,65,000/-. [4] The Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.R. that the payment of brokerage for procurement of business is customary in the appellant's line of business and entering into an agreement is not mandatory and mere absence of same cannot lead to any conclusion that the genuineness of the same was not proved. Further, it is seen that the brokers not only introduced customers to the appellant but also motivated them to make further investments and undertook required follow up of the investment formalities. Without the assistance of brokers, the appellant would not have been able to generate this large volume of business. It is further seen that as against the mutual fund commission of Rs.68.41 lacs earned by the appellant the brokerage paid is Rs.13.26 lacs, which works out to around 27% and cannot be said to be unreasonable in any manner. The appellant offered the disallowance for part amount u/s 40(a)(ia) of the IT Act for the reason that the TDS deducted during the year was paid late which was due to lack of administrative coordination. From the detailed chart furnished during the appellate proceedings, the appellant has been able to prove the genuineness of payment of commission/brokerage by furnishing PAN details of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance premium. The AO noticed that keyman insurance policy was taken in the name of Shri Ashish Shah, a director of the company and the premium of Rs. 10 lacs was paid only on 31/03/2006 in terms of policy no.8117542. Since the assessee followed mercantile system of accounting and the insurance premium was paid for a year until 30/03/2007 while the decisions relied upon by the assessee in CIT vs. United Credit Ltd. (2002) 177 CTR (Cal) 251; CIT vs. Smt. Vimla D Sonawani and Others (1996) 212 ITR 430 (Bom) and CIT vs. Balapur Vibhag Jungle Kamdar Mandali Ltd. (1991) 22 CTR Guj 214 related to the period prior to the amendment to provisions of sec. 145 of the Act, the AO disallowed an amount of Rs.9,97,260/-. 7. On appeal, the learned CIT(A) deleted the disallowance in the following manner:- "3.3 I have considered the facts of the case and the submissions of the appellant. From the details, it is seen that Keyman insurance covers the life of the MD of the company until death and hence the observation of the A.O. that it was valid only for one year is not correct. Further, the premium paid earlier by the appellant for A.Y. 2005-06 was fully allowed by the Department. I agree wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, we do not find any infirmity in the approach of the ld. CIT(A) in allowing the entire claim in the year under consideration. In view thereof, especially when the Revenue have not placed any material before us so as to enable us to take a different view in the matter nor invited our attention to any contrary decision, we are not inclined to interfere. Consequently, ground no.2 in the appeal is dismissed. 10. Ground no.3 in the appeal relates to disallowance of Rs.1,65,000/- on account of incentive payment. The AO noticed during the assessment proceedings that the assessee paid incentive of Rs.1,65,000/-, of which major amount was debited on 31.3.2006 and Rs.15,000/- on 19.4.2005. On verification it transpired that an amount of Rs.50,000/- was paid to Shriadhar Thoda and Rs.1,00,000/- was paid to Shri Purav Mehta by way of bonus. To a query by the AO, the assessee replied that similar amount was disallowed in last year also and their appeal was pending before the ld. CIT(A). Since the assessee did not establish the business expediency of the payment nor relevant details were filed while expenses were debited only on 31/03/2006 and relevant details of actual payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities worth Rs.1,27,02,856/- and sold such securities worth Rs.1,27,46,691/- while the total turnover exceeded Rs.2.54 crores. To a query by the AO regarding share trading activities, the assessee replied that the assessee company was in the business of advising and distribution of financial service products and the investments were made out of surplus funds. It was clarified that the assessee did not indulge in any share trading activity. However, the AO did not accept the submissions of the assessee on the ground that turn over in respect of sale and purchases of securities was Rs.2.54 crores while income from brokerage was quite low in comparison to transactions in shares. Keeping in mind the holding period of securities and frequency of transactions, the AO observed that the motive of the assessee was share trading and not investment. Accordingly, while holding the trading activity in securities as part of its business and profession, the AO assessed the entire capital gain of Rs.5,49,200/- (Rs.1,98,355/- + Rs.3,50,845/-) under the head business. 15. On appeal, the learned CIT(A) has accepted the claim of the assessee in the following terms:- "6.3 I have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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