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TMI Blog2017 (3) TMI 1688X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken by the Tribunal is just and proper and this issue is also required to be answered in favour of the assessee and against the department. As regards Section 80JJAA in our opinion, permanency is not there and increase is there. The Tribunal while considering the same has taken into consideration the provisions of that Section and rightly granted the benefit in favour of the assessee. Therefore that issue is also required to be answered in favour of the assessee and against the department. Regarding Section 43B of the Act, establishment and research is always for the purpose of benefit of the business. In that view of the matter, the said issue is also required to be answered in favour of the assessee and against the department. - D.B. Income Tax Appeal No. 327/2005, 615/2008, 638/2008, 300/2009, 303/2009, 640/2009, 257/2011, 173/2012, 235/2016 And 238/2016 - - - Dated:- 21-3-2017 - Mr. Mahendra Maheshwari J. For the Appellant(s) : Mr. R.B. Mathur with Mr. K.D. Mathur For the Respondent(s) : Mr. Sanjay Jhanwar JUDGMENT Since the present appeals involve a common question of law, therefore, the same were heard together and are being decided by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 11.02 crore during this period (before depreciation). The net profit has been declared as ₹ 8.98 crore as against ₹ 5.57 crore in the preceding year. 6. The main question common in all appeals is regarding commission and brokerage which is paid under Section 37 of the Income Tax Act. Counsel for the department has taken us to the provisions of Section 37 which reads as under:- 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . [Explanation 1.]-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. [Explanation 2.-For the removal of doubts, it is here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is able to show that it has paid brokerage b commission to the commission agents for the purpose of the business of the assessee and is entitled to deduction. Thus considering the entirety of the facts and the alternative ground No. 5 of the assessee and the possible leakage disallowance of ₹ 25.00 lacs is sustained out of total disallowance of ₹ 4,56,22,058/- and the balance disallowance of ₹ 4,31,22,058/- is directed to be deleted. 9. Counsel has contended that in view of the explanation to Section 37 of the Act and more particularly the finding of the Assessing Officer at page 7 which are quoted below, the view taken by the Tribunal is required to be reversed:- However in the quarterly results of the company huge commission payment were shown to reduce the profits. Statement of Sh. Anant Luharia, who is Manager (Finance) and supervises the works relating to accounts and financial management, was recorded on 13-03-2003. He told in reply to Q.No. 12 that he can t say for sure that books of accounts, which were impounded by the deptt. During survey on 06-03-03, are complete or not because he is not concerned with maintenance of books on day- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stic story. It is story that does not accord with human probabilities. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece or evidence. 9. The Hon'ble Supreme Court in yet another case, of Sumati Dayal Vs. Commissioner of Income Tax (Supra) has observed as under:- In our opinion the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the claim about the amount being winnings from races is not genuine. It cannot be said that explanation offered by the assessee in respect of the said amount has been rejected unreasonably and that finding that the said amounts are income of the assessee from other sources is not based on evidence. 11. And in view of the judgment of the Supreme Court in Premier Breweries Ltd. Vs. Commissioner of Income Tax, reported in (2015) 372 ITR 180 (SC), in particular para 11 and 12 which are quoted below, the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Government Circulars along with the agreements between the assessee and the commission agents and the details of payments made by the assessee to the commission agents as well as the affidavits filed by the husbands of the partners of M/s. R.J. Associates were considered by the High Court. The statement of the Managing Director of Tamil Nadu State Marketing Corporation Ltd. (TASMAC Ltd.), to whom summons were issued under Section 131 of the Act, to the effect that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd. was also taken into account. The basis of the doubts regarding the very existence of R.J. Associates, as entertained by the Assessing Officer, was also weighed by the High Court to determine the entitlement of the assessee for deduction under Section 37 of the Act. In performing the said exercise the High Court did not disturb or reverse the primary facts as found by the learned Tribunal. Rather, the exercise performed is one of the correct legal inferences that should be drawn on the facts already recorded by the learned Tribunal. The questions reframed were to the said effect. The legal Page 17 Page 17 of 18 inference that should be drawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. Explanation 1.-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 2.-For the purposes of clause (a), as in force at all material times, any sum payable means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid. Explanation 4.-For the purposes of this section,- (a) public financial institutions shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); (aa) scheduled bank shall have the meaning assigned to it in the Explanation to clause (iii) of subsection (5) of section 11; (b) State financial corporation means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); (c) State industrial investment corporation means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and eligible for deduction under clause (viii) of sub-section (1) of section 36.]. 13. Relying on Section 43B of the Act, he has contended that the incentives have been wrongly allowed by the Tribunal and the same is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry having potential, to spur industrial growth in ancillary, tertiary and secondary sector of the economy. The other scheme announced by the Government of Gujarat as Capital Investment Incentive Scheme on 11th September 1995 was intended to attract investments to generate greater employment in less industrially developed areas of Gujarat and also to secure balanced development of industries in Gujarat through dispersal of industries in the most backward area and backward areas. It is thus clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investment was, inter alia, through exemption from payment of sales tax. 9. He further contended that in view of decisions of this Court in Commissioner of Income -tax v. Birla VXL Ltd . reported in (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. But, if monies are given to the assessee for assisting him in carrying out the business operations and given after the satisfaction of the conditions of commencement of production, such subsidy must be treated as assistance for the purpose of the trade. 14. In the result, we do not find that the Tribunal has committed any error. No question of law, therefore, arises. Tax Appeals are therefore dismissed. 10. In the case of Deputy Commissioner of Income -tax v. Munjal Auto Industries Ltd . (supra), this Court has observed as under:-- 7. From the provisions of the said scheme, it clearly emerges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Undertakings. It was observed that there was no evidence or material, except suspicion or a surmise that the commission payment, in fact, represents illegal gratification paid to unknown officers and therefore, should not be allowed as a deduction. A factual decision is perverse if the authority has acted without any evidence or on a view of facts cannot be reasonably entertained. A perverse finding is one, if it is arrived at without any material or if it is arrived at or inference is made on material which would not have been accepted or relied upon by any reasonable person. It is based on surmise, conjectures or suspicions and is not rationally possible. A factual conclusion is regarded as perverse, when no person duly instructed or acting judicially could upon the record before him, have reached the conclusion arrived at the tribunal/authority. [See CIT Vs. S.P. Jain (1973) 87 ITR 370 (SC)]. On the basis of material referred to and the reasoning given by the tribunal it is no possible to hold that findings recorded are rationally illogical, inconsistent with the facts on record or not supported by evidence and material. The appeals are dismissed on the ground that no substant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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