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TMI Blog2017 (5) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... judicious decision rendered by the learned CIT(A) in rejecting the assessee’s claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(XIV) of the Act. Consequently, ground No. 2 of the assessee’s appeal is dismissed. Disallowance of Market Intelligence Collection Charges - Held that:- Except for raising this ground, the assessee has failed to bring on record material evidence to controvert the findings of the learned CIT(A) and thereby establish with material evidence that its claim for being allowed expenditure incurred on market intelligence collection charges is in order and was to be allowed. In this view of the matter, we find no reason to interfere with the decision rendered by the learned CIT(A), in sustaining the disallowance in respect of the assessee’s claim for market intelligence collection charges to the extent of ₹ 31,00,093/- @ `50/- per customer. - Decided against assessee. - ITA No. 4198/Mum/2014 - - - Dated:- 5-5-2017 - Shri Jason P. Boaz, Accountant Member, And Shri Ram Lal Negi, Judicial Member For the Appellant : None For the Respondent : Shri J. Mohammed Rizwan ORDER Per Jason P. Boaz, A.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions at the time of hearing of appeal and request for the admission of additional evidence, as may be warranted. 4. This appeal was posted for hearing on many occasions. On all dates of hearing, except one, the case was adjourned as none was present on behalf of the assessee. On two occasions when the Bench did not function, the case was adjourned and next date was intimated by display on notice board. Even issue of notice for hearing by RPAD a number of times did not elicit any response by the assessee. In these circumstances, we are of the considered opinion that the assessee is not interested in pursuing this appeal. The learned D.R., however, was present and ready to argue Revenue s case. In these circumstances, we proceed to dispose off this appeal exparte with the assistance of the learned D.R. and the material on record. 5. Ground No. 1 Disallowance of Depreciation on Business Development Rights 5.1 In this ground, the assessee assails the impugned order of the CIT(A) in upholding the disallowance of depreciation of ₹ 36,76,397/- on business development rights. 5.2.1 According to the learned D.R. for Revenue, in the course of assessment proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation of ₹ 36,76,397/- being 25% of Rs,1,47,05,589/- claimed by the appellant was disallowed. On the other hand the AR of the appellant has submitted that there is no depreciation claimed falls in the heading of intangible asset in part B of depreciation table. As the facts of the case show that the rights were covered in this head as other business or commercial rights of similar nature. it was also claimed that depreciation on this item had been allowed by the Department in the A.Y.2003-04 when the expenses were capitalized in the case of JLI Insurance Brokerage Company. The AR has also filed copy of the assessment order for A.Y.2003-04. Thus it was argued that the AO was not correct in submitting the remand report that no depreciation was allowed in A.Y.2003-04. The remand report was also called. for on. this issue, the gist of which is reproduced as under.: As submitted in the letter dated 11.12.2013, the above case was received on transfer from the charge of DCIT-8(3) in the quarter ending March, 2013. It is seen that the case was earlier assessed with the charge of DCIT-8(2), Mumbai till July, 2011 and the assessment proceedings for the concerned years had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company (Prop.S hri Vasant R. Pandit) which was subsequently taken over by M/s. PAN INDIA INSURANCE BROKERAGE COMPANY PVT. LTD. On perusal of the copy of assessment order dated 27.03.2003 for AY 2003-04 submitted by the Assessee Company. It is seen that contrary to the claim made by the Assessee company, the claim of depreciation towards business development expenses was disallowed in the said order after a detailed discussion (Para 14, Page 15 16). Copy of Assessee's submission dated 11.02.2014 is enclosed herewith. Under the circumstances, the above claim made by the assessee is found to be factually incorrect. From the perusal of the remand report and submissions it is clear that the assessee company has taken over the business of M/s. JLI Insurance Brokerage Co., a proprietary concern of Shri Vasant Raj Pandit. The AO has disallowed the claim of depreciation by holding that no documentary evidence was filed to prove that any asset has been created by incurring the expenditure on the training of staff at various locations at different centers. The AO has also held that no evidence was filed relating to the training of the staff and the genuineness of expenses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 54,47,588/-. But it is not understandable how the AR of the appellant has made submission that depreciation was allowed in the A.Y.2003-04. In view of these facts and circumstances, it is held that the assessee has failed to submit complete documentary evidences relating to the preoperative expenses before the AO and before me. Therefore, the claim cannot be allowed. Hence, the depreciation claimed of ₹ 36,76,397/- disallowed by the AO is confirmed and the ground of appeal is dismissed. 5.3.2 On an appreciation of the contentions of the learned D.R. for Revenue, the facts of the case and the orders of the authorities below, we find that except for raising this ground, the assessee has failed to bring on record before us any material evidence to establish its claim for being allowed depreciation @25% on business development rights and controvert the findings of the authorities below. In this view of the matter we find no reason to interfere with or deviate from the judicious findings of the learned CIT(A) in rejecting the assessee s claim for being allowed depreciation @25% on business development rights. Consequently, ground No. 1 of Assessee s appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elligence collection charges was merely continuation of the business practice and that too at much reduced rate. It was also submitted that the payment of such charges to Frontier Trading Company has nothing to do with the succession of proprietary concern with the appellant company for which only consideration was the allotment of 99% shares to the proprietary concern which was evident from the notes to the accounts and Balance Sheet. It was also submitted that there is no law that once a proprietary concern has been succeeded or converted to a company the company cannot enter in any commercial and mutually beneficial agreement with him. Thus it was argued that section 47(xiv) has no obligation to the facts of the case. From the submissions and facts of the case it is observed that as per the proviso (c) to section 47(xiv) it is very clearly mentioned that the sole proprietor cannot receive any consideration or benefit directly or indirectly in any form or manner than by way of allotment of shares in the company. But in the present case the assessee company has paid the amount of ₹ 2,30,23,484/- to Frontier Trading Company, a proprietary concern of Shri Vasant Raj Pand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- out of total claim of ₹ 46,26,139/-, thereby upholding the disallowance to the extent of ₹ 31,00,093/-. It is strongly contended that in these appellate proceedings the assessee has failed to bring on record any material evidence to controvert the finding of the learned CIT(A) and therefore the assessee s ground No. 3 requires to be rejected. 7.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. On a perusal of the impugned order, we find that the learned CIT(A) has dealt with this issue at length and rendered his finding at paras 4.1 to 4.3 thereof as under: - 4.1 The AO has observed that assessee has debited ₹ 46,50,139/- towards market intelligence agencies. When the AO has asked for the explanation of these expenses the assessee has submitted that it was permitted to use third parties to collect information for procuring insurance business. The assessee used the services of another proprietary concern M/s. Frontier Trading Company for rendering services for the purpose of gathering market intelligence. On the basis of that Agreement a separate composite agreement broking licence was procured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 150/- per questionnaire to just ₹ 25/- per questionnaire, thereby disallowing the expenditure to the extent of ₹ 38,75,116/- . The disallowance has been made on the ground that the payment has been made to a concern in which the director of the appellant company has substantial interest and that the income earned from such policies in some cases was as low as ₹ 50/- per policy. In this connection, it is submitted that AO has incorrectly stated in his order that the income from 'certain' policies was low of ₹ 50/- without pointing out even a singly instance for the same. The low income of ₹ 50/- is there for almost negligible number of policies and that too for general insurance category whereas for most of the policies, the amount is above ₹ 500/- for Life Insurance and above ₹ 100/- for general insurance. The AO has failed to notice that this year, the expenditure incurred on such expenses has reduced from 271% to 89% as compared to last year and as such, the expenses claimed were highly reasonable and justified. It may further be mentioned that such charges have resulted in the generation has large revenues to the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or creating losses and payment was given to the person who has substantial interest in the .assessee company just to avoid the payment of taxes. Thus the AO has reduced the payment per person of ₹ 25/- against the claim of the assessee at ₹ 150/- per customer. The AO has allowed the amount of ₹ 7,75,023/- and balance amount of ₹ 38,75,116/- was disallowed. On the other hand the AR of the appellant has submitted that the income from certain policy was low of ₹ 50/- without pointing out even a single instance for the same. The low income of ₹ 50/- is there for almost negligible number of policies and that too for general insurance category whereas for most of the policies the amount was above ₹ 500/- for Life Insurance and Rs,100/- for general insurance. It was also submitted that the AO has ignored that the expenses in the year under consideration has been reduced substantially. The AR has also argued that it is well settled principle that expenditure cannot be disallowed merely it has not yielded any income or has yielded lower than the expected income. Thus the disallowance made by the AO is not justifiable. From the perusal of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,50,046/- out of the total claim of ₹ 46,26,139/- and the balance disallowance of ₹ 31,00,093/- is upheld. The ground of appeal is partly allowed. 7.3.2 On an appreciation of the contentions of the learned D.R. for Revenue, the facts of the case and the impugned order of the learned CIT(A) (supra), we find that except for raising this ground, the assessee has failed to bring on record material evidence to controvert the findings of the learned CIT(A) and thereby establish with material evidence that its claim for being allowed expenditure incurred on market intelligence collection charges is in order and was to be allowed. In this view of the matter, we find no reason to interfere with the decision rendered by the learned CIT(A), in sustaining the disallowance in respect of the assessee s claim for market intelligence collection charges to the extent of ₹ 31,00,093/- @ `50/- per customer. Consequently, ground No. 3 of the assessee s appeal is dismissed. 8. Ground No. 4 of the assessee s appeal is general in nature and therefore no adjudication is called for thereon. 9. In the result, the assessee s appeal for A.Y. 2004-05 is dismissed. Order pronoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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