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TMI Blog2018 (5) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ntification, we do not see any reason to sustain 10% disallowance also. This was more particularly in view of the fact that the insertion of the name of the sister concern, namely, Surendra Buildtech P. Ltd., was for the purpose of inviting more investment in the pre launched projects, which is certainly in furtherance of the business interest of the assessee. Delete the disallowance on this count. - Decided in favour of assessee Deemed dividend addition u/s 2(22)(e) - Held that:- in view of peculiarities involved in this line of business depending upon the need, there is exchange of money between different sister concerns for the purpose of business and not for any personal benefits. Since the finding of the learned CIT(A) is that this particular type of transactions are carried out in the regular course of business and do not fall within the ambit of Section 2(22)(e) of the Act, we find no material whatsoever to disturb the findings of the learned CIT(A) in this respect. So also in respect of the amounts advanced to Shri S.M. Mukhija(HUF), we also found that they cannot bring to tax in the hands of the assessee, who is a different taxable entity. For these reasons while agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sehold expenses at ₹ 1,20,000/-, as such, after reducing the same by ₹ 60,000/- declared by the assessee, we restrict the addition to a sum of ₹ 60,000/- - Decided partly in favour of assessee. - I.T.A. No. 5820/Del/2010, I.T.A. No.693/Del/2011 - - - Dated:- 27-4-2018 - Shri N. K. Saini, Accountant Member And Shri K. Narsimha Chary, Judicial Member Assessee by : Shri M.P. Rastogi Department by : Shri Kauyshlendra Tiwari, Sr. DR ORDER Per K. Narasimha Chary, JM These two appeals emanate from the order dated 5.10.2008 in ITA No.153/2010-11 passed by the learned Commissioner of Income-tax (Appeals)-XII, New Delhi (for short CIT(A) ) in Appeal No.153/09-10. 2. Relevant facts in brief are that the assessee derives his income as real estate agent. For the Asstt. Year 2007-08, he filed his return of income on 31.10.2007 declaring a total income of ₹ 1,06,17,066/-. However, learned AO passed the order dated 31.12.2009 u/s 143(3) of the Act making the following additions: S.No. Name of disallowance Amount (Rs) 1 Marketing expenses disallowed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aser of the flat could be given by the builder only and not by the assessee, which is only a broker, as such, whatever the assessee was allowing on the name of discount is in fact in the nature of sub commission, as such, the provisions of Section 194H are attracted for non deduction of TDS in accordance with law on such amounts. Learned AO disallowed the same u/s 40a(ia) of the Act. 7. Learned CIT(A), on examination of record and also the earlier year assessments and orders of the first appellate authority as well as the Tribunal, found that in order to subject any amount to TDS treating it as commission, it is necessary that the recipient of the money should render some service to the payer; the payments must relate to such service, and there shall be the relationship of principal and agent, which ingredients are conspicuously absent in the matter. Learned CIT(A) found that the recipient does not render any service to the assessee and on the contrary, it is the assessee, who renders service by way of help to book a flat. In these circumstances, for non satisfaction of the conditions required to attract the provisions u/s 194H, learned CIT(A) held that the discount offered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the material before him found as a matter of fact that the learned AO did not take any steps to examine either Mr. Vinay Mukhija or Ms Shruti Agarwal to know whether any services were actually rendered by them or not. Without any material whatsoever at his end, learned AO solely placed reliance on surmises and conjectures in respect of this disallowance. Learned CIT(A) observed that it was incumbent upon the AO to verify whether these two people have rendered any services and whether the remuneration paid to these two peoples is on par with the market value of the services rendered by them. Admittedly, learned AO did not undertake this verification. 12. Further in respect of Ms Shruti Agarwal s age or her relationship with the purchaser of the flat or the location of the flat are irrelevant consideration inasmuch as there is no such thing as that a 19 year old girl cannot undertake any occupation or profession or that her father cannot opt to purchase a flat from the daughter, who in that business. There is nothing abnormal that a sub broker at Delhi cannot book such flats for the purchase. The reason adopted by the learned CIT(A) are impeccable and does not warra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icularly in view of the fact that the insertion of the name of the sister concern, namely, Surendra Buildtech P. Ltd., was for the purpose of inviting more investment in the pre launched projects, which is certainly in furtherance of the business interest of the assessee. We, therefore, delete the disallowance on this count. Ground No.3 of revenue s appeal is accordingly dismissed whereas Ground No.1 of assessee s appeal is allowed. 17. Now coming to the addition by applying Section 2(22)(e) of the Act is concerned, the facts are that M.s Surendra Mohan (HUF) received a sum of ₹ 20 lacs and the assessee received a sum of ₹ 33,98,617/- from M/s Surendra Buildtech P. Ltd. where he is holding less than 10% of the voting power. Learned AO, therefore, invoked Section 2(22)(e) of the Act and brought the amount of ₹ 33,98,617/- to tax in the hands of the assessee. 18. Learned CIT(A) on verification of record and the submissions of the assessee before him found that M/s Surendra Buildtech is a company carrying on real estate broker business as the assessee. He also found that prior to 30.11.2006 M/s Surendra Buildtech was having credit balance eon account of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent taxable entity. For these reasons while agreeing with the learned CIT (A) on this aspect, we dismiss the fourth ground of appeal of the revenue. 22. Now coming to the disallowance of ₹ 2,56,006/- , the case of the assessee is that on 1.2.2005 against the security of house property, he has borrowed a sum of ₹ 35 lacs from the ICICI bank for business purpose, so also mentioned in the application submitted to the bank. It is his further case for the Asstt. Year 2005- 06 and 2006-07, the interest paid on this loan amount is allowed but the AO disallowed the same in this year stating that the loan actually represents the home loan as it is in the name of the assessee and his wife, as such, any interest paid on the same cannot be allowed as business expenditure. 23. Learned CIT(A), on verification of record, found that the loan was taken from ICICI Home Finance and 8.25% as on 29.1.2005 at floating rate of interest. He observed that the assessee filed a format for the end use of the loan amount which states that the said loan is for the purpose of business. However, the said format was undated and does not specify whether the same was approved by the ICICI Home Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny assessment u/s 143(3). We, therefore, hold that the interest on business loan is allowable as business expenditure. On this premise, we allow Ground no.2 of the assessee s appeal. 26. Now coming to the disallowance of ₹ 1 lac out of business promotion expenses and ₹ 1,77,868/- out of car and telephone, ,learned CIT(A) gave relief to the extent of ₹ 50,000/- to the assessee and restricted the disallowance to ₹ 50,000/-. It does not appear to be an unreasoned one. Further, for the earlier assessment years also, there was disallowance of 10% of the car and telephone expenses. It is not brought to our notice that this disallowance was deleted subsequently. Fact remains that the assessee has not been maintaining any log book and is unable to justify the entire expenditure. In these circumstances, we find it difficult not to sustain 10% disallowance of the expenses on account of car and telephone maintained. We, therefore, dismiss Ground Nos. 3 4 of the assessee s appeal. 27. Now coming to the 5th and last ground of assessee s appeal, assessee had shown the withdrawals on account of household expenses only to the tune of ₹ 60,000/-. Learned ..... 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