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TMI Blog2011 (5) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... counted with banks and the banks pay the Net Present Value of future receivables to the assessee as part of securitization arrangement - This amount would obviously be the income of the assessee from the long term housing loan disbursed by the assessee. In the circumstances, we are of the view that the securitization income is an income from business of long term housing finance - Appeal is dismissed - ITA No. 2167/Mds/2010, - - - Dated:- 5-5-2011 - O.K. Narayanan, George Mathan, JJ. K.E.B. Rengarajan, Jr. Standing Counsel for the Appellant G.S.D. Babu for the Respondent ORDER George Mathan:- 1. I.T.A. No. 2167/Mds/2010 is an appeal filed by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-III, Chennai in appeal No.4/2010-11/A.III dated 30.9.2010 for the assessment year 2005-06. 2. Shri K.E.B. Rengarajan, Junior Standing Counsel represented on behalf of the Revenue and Shri G.S.D. Babu, C.A. represented on behalf of the assessee. 3. In this appeal, the Revenue has raised the following grounds:- 1. The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer's contention it was not possible to ascertain from the details furnished by the assessee whether the recipients actually mobilised any deposits for the deposits for the appellant or not. 4.2 In this issue, also having regard to Rule 46A, an opportunity ought to have been given to the assessing officer to submit report on the evidences not produced during the course of assessment proceedings. 4.3 It is further submitted that the brokerage is only for the deposits mobilised. In this case, since the nexus between the deposits mobilised for the brokerage paid cannot be ascertained, the assessing officer's contention would be correct. 5. The learned CIT(A) has erred in deleting the disallowance of Rs. 1,21,60,250/- being claim of deduction of u/s. 36(1)(viii). 5.1 The learned CIT(A) ought to have appreciated that as per the provisions of Section 36(1)(viii) "any special reserve created and maintained by a specified entity, an amount not exceeding 20% of the profits derived from eligible business computed under the head 'profits and gains of business or profession {before making any deduction under this clause} carried to such reserve account". 5.2 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Section 40A(2)(b) of Income-tax Act, 1961 (hereinafter called "the Act") and held that 0.5% of the guarantee fee paid to M/s Weizmann Ltd. was not allowable. It was a submission that the syndication charges/guarantee fee paid to M/s Weizmann Ltd. was to the tune of Rs. 1,00,03,428/-. It was a submission that M/s Weizmann Ltd. was promoter of assessee-company and it should have provided services at free of cost to the assessee. It was also submission that the A.O. had observed that leading banks and financial institutions were also share holders of assessee-company, it could have raised loans directly from banks. It was submission that the assessee had also paid an amount of Rs. 29,82,737/- to third parties for rendering similar services as rendered by M/s Weizmann Ltd. and the said commission was at the rate of 0.5% to 1%. It was the submission that according to National Housing Board, the companies which were doing business of housing finance were liable to pay guarantee commission of 0.5% for the loans guaranteed by the National Housing Board. It was submission that the A.O. had disallowed the whole of the guarantee fee paid by the assessee to M/s Weizmann Ltd. He ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings, disallowed Rs. 1,50,000/- out of the staff welfare expenses claimed by the assessee. It was a submission that the ld. CIT(Appeals) had deleted the disallowance out of the same, to an extent of Rs. 1,00,000/-. It was a further submission that the A.O. had also made a further disallowance of Rs. 2,00,000/- out of the expenditure incurred by the assessee on account of reimbursement of leave travel allowance, medical, etc. paid to staff and the ld. CIT(Appeals) had deleted Rs. 1,00,000/- out of the said disallowance. It was submitted that the ld. CIT(Appeals) ought not to have deleted the disallowance made by the A.O. 8. In reply, the learned A.R. submitted that the disallowance was on an ad hoc basis and in regard to bills and vouchers, it was submitted that the A.O. had not called for any bills and vouchers in this case. It was further submitted that even though the Revenue has raised an issue of Rule 46A in regard to entertaining of additional evidence by the ld. CIT(Appeals), no additional evidence had been produced. He vehemently supported the order of the ld. CIT(Appeals). 9. We have considered the rival submissions. A perusal of the order of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rage on the mobilisation of public deposits by a banking company is an accepted norm. Further, if the A.O. did not believe the payment of brokerage to eight persons, he should have disallowed the full amount. There is also no finding by the A.O. that the payments were not genuine or that the payments were bogus. Once the payment has been accepted as brokerage for mobilisation of deposits, the same cannot be disallowed in part. In the circumstances, we are of the view that the findings of the ld. CIT(Appeals) on this issue is on right footing and does not call for interference. Thus ground Nos.4 and 4.3 stand dismissed. 13. In regard to ground Nos.5 to 5.4, it was submitted by the ld. Junior Standing Counsel that in the course of assessment, the A.O. had restricted the claim of deduction under Section 36(1)(viii) of the Act. It was a submission that the A.O. had treated the securitization income of the assessee as not being eligible for claim of deduction under Section 36(1)(viii) of the Act. It was submitted that the deduction under Section 36(1)(viii) of the Act was not allowable to the assessee as the same was not derived from the long term housing finance but was practically ..... X X X X Extracts X X X X X X X X Extracts X X X X
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