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TMI Blog2016 (7) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. In the present case, the assessee has paid commission to four persons. The objection of the AO is that they are simple graduates and they could not earn this much of income. But I failed to understand the reasoning of the AO, because, he has not given any basis for doubting the capability of all four persons. AO has not referred any material as to how services rendered by them could be availed at a lower rate from the market. The ld.CIT(A) has rightly deleted the addition Addition on loss due to flood - CIT(A) deleted the addition - Held that:- FAA did not concur with this conclusion of the AO on the ground that, if this type of plea is being accepted, then, there could not be any loss to any concern. The acceptance of the insurance company could not be a guiding factory for gauging the loss of any assessee. After taking into consideration the finding of the CIT(A), do not find any reason to interfere in it. Disallowance of misc. expenses - CIT(A) deleted such disallowance on the ground that misc. expenses claimed by the assessee are only 0.16% of the turnover - Held that:- CIT(A) was satisfied that the assessee has not debited any personal expenditure or other expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the books of accounts. He, accordingly, rejected the book results of the assessee and applied GP rate of 5.57%. This rate has been adopted by the AO after taking average GP of three years. In this way, he made addition of ₹ 12,06,924/-. The ld.CIT(A) has deleted the addition by observing as under: 3.2. I have gone through the assessment order, reasons of the A.O. for rejecting the books of accounts, submissions of the appellant and evidences. It is seen that the only reason for not accepting the book results was non-maintenance of stock registers; purchase registers and goods receipt registers. No other discrepancies had been pointed out by the A.O. on the other hand. The appellant has given cogent reasons for fall in G.P rate It is seen that the reason given by the AO. i.et nonmaintenance of stock registers, etc. is not correct. The appellant has maintained this and the details are available online. The business of the appellant is subject to inspection and under the direct control of Drug Authorities and cannot be conducted without maintaining proper stock records. The book results were corroborated by the VAT audit and these were before the A.O. It is also observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they were assisting the business of the assessee. In the last year, such disallowance was deleted by the ld.CIT(A), and the Revenue did not prefer any appeal. 8. On the other hand, ld.DR relied upon the order of the AO. 9. I have duly considered rival contentions and gone through the record carefully. Section 40A(2)(b) contemplates that if persons by virtue of their relationship or position with the management persuade the assessee to pay a higher amount of remuneration in lieu of services, then such higher amount of remuneration could be disallowed. In other words, if those services could be availed from the open market at a lower rate, then, excess payment is to be disallowed. In the present case, the assessee has paid commission to four persons. The objection of the AO is that they are simple graduates and they could not earn this much of income. But I failed to understand the reasoning of the AO, because, he has not given any basis for doubting the capability of all four persons. AO has not referred any material as to how services rendered by them could be availed at a lower rate from the market. The ld.CIT(A) has rightly deleted the addition, therefore, I do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld.counsel for the assessee, at the outset, submitted that the issue in dispute is squarely covered by the decision of the Hon ble Gujarat High Court rendered in the case of CIT Vs. Gem Art, 22 taxmann.com 243 (Guj). On the other hand, the ld.DR relied upon the order of the AO. 17. I have considered rival contentions and gone through the record carefully. The order of the Hon ble Gujarat High Court in the case of Gem Art (supra) is very brief order, but directly on the point. The relevant part of his order read as under: 3. The only point raised by the Revenue in this appeal is whether the Tribunal below committed substantial error of law in holding the the premium paid for the partners under the Keyman Insurance Policy was a revenue expenditure deductible under Section 37 of the Income Tax Act. 4. In order to appreciate the aforesaid question, it would be profitable to refer to the provisions contained in Section 10(10D) of the Act, which are quoted below : 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included (1) to (10CC) .. ... ... ... ... (10D) any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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