Income Tax Officer-1(1), Lucknow V. M/s A.T. Enterprises, Lucknow

ITA 140/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4866 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B P YADAV COST ACCOUNTANT
• Keywords: Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.140/LKW/2014 ASSESSMENT YEAR:2009-2010 INCOME TAX OFFICER-1(1), RANGE-1, LUCKNOW. VS. M/S A. T. ENTERPRISES, D-169, 1 ST FLOOR, VIBHUTI KHAND, GOMTI NAGAR, LUCKNOW. PAN:AANFA6676P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY SHRI B. P. YADAV, COST ACCOUNTANT DATE OF HEARING 14/12/2015 DATE OF PRONOUNCEMENT 12/01/2016 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF LEARNED CIT(A)-II, LUCKNOW DATED 29/11/2013 FOR THE ASSESSM ENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS: 1. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE EASE IN DELETING THE ADDITION OF RS.2,50,000/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT ABL E TO FURNISH THE DETAILS OF PAYMENTS MADE WHICH HAD BEEN CLAIMED TO HAVE BEEN PAID TO AUDITORS AND COULD NOT PROVIDE THE DETAILS OF THE NATURE OF SERVICES PROVI DED BY THE AUDITOR. 2. THE LD. CIT (A) HAS ERRED IN LAW & ON FACTS OF T HE EASE IN DELETING THE ADDITION OF RS.55,37,944/- WITHOUT APPRECIATING THE FACT THAT THE PAYMENTS WERE MADE TOWARDS COMMISSION IN CONTRAVENTION OF SECTION 41 O F INSURANCE ACT, 1938. 2 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGAR DING GROUND NO. 1, WE FIND THAT THE ADDITION OF RS.2.50 LAC WAS MADE B Y THE ASSESSING OFFICER ON THE BASIS THAT THE ASSESSEE WAS REQUIRED TO FURN ISH AS TO FOR WHAT SERVICES RENDERED, THIS EXPENDITURE OF RS.2.50 LAC WAS CLAIMED BUT THE ASSESSEE COULD NOT SATISFY THIS QUERY OF THE ASSESS ING OFFICER. THIS DISALLOWANCE WAS DELETED BY CIT(A) ON THE BASIS THA T THE AUDIT FEES EXPENSES CLAIMED AND SHOWN BY THE ASSESSEE IN PROFI T & LOSS ACCOUNT ARE REVENUE EXPENDITURE, WHICH WERE INCIDENTAL TO THE B USINESS OF THE ASSESSEE. HE HAS ALSO GIVEN A FINDING THAT THE GEN UINENESS, CORRECTNESS AND REASONABLENESS OF QUANTUM OF AUDIT FEES WAS NOT DISPUTED BY THE ASSESSING OFFICER. HE HAS ALSO GIVEN A FINDING THA T MERELY BECAUSE THE ASSESSEE HAS SHOWN UNPAID LIABILITY IN BALANCE SHEE T AS ON 31/03/2009, THE SAME CANNOT BE DISALLOWED. ON THE BASIS OF THESE O BSERVATIONS, HE DELETED THE DISALLOWANCE AND WE FIND NO INFIRMITY IN THE OR DER OF CIT(A) ON THIS ISSUE SINCE LEARNED DR OF THE REVENUE COULD NOT CON TROVERT THE FINDINGS OF CIT (A) AND THEREFORE, WE DECLINE TO INTERFERE IN T HE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 1 IS REJECTED. 5. REGARDING GROUND NO. 2, LEARNED D. R. OF THE REV ENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). WE FIND THAT THE DISAL LOWANCE WAS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT THIS EXPEND ITURE CLAIMED BY THE ASSESSEE IS IN CONTRAVENTION OF SECTION 41 OF THE I NSURANCE ACT, 1938. THE ASSESSING OFFICER HAS NOTED THAT AS PER THIS SECTIO N, NO PERSON SHALL ALLOW OR OFFER TO ALLOW, EITHER DIRECTLY OR INDIRECTLY AS AN INDUCEMENT TO ANY PERSON TO TAKE OUT OR RENEW OR CONTINUE AN INSURANC E IN RESPECT OF ANY KIND OF RISK RELATING TO LIVES OR PROPERTY IN INDIA, ANY REBATE OF THE WHOLE OR PART 3 OF THE COMMISSION PAYABLE OR ANY REBATE OF THE PREM IUM SHOWN ON THE POLICY, NOR SHALL ANY PERSON TAKING OUT OR RENEWING OR CONTINUING A POLICY ACCEPT ANY REBATE, EXCEPT SUCH REBATES AS MAY BE AL LOWED IN ACCORDANCE WITH THE PUBLISHED PROSPECTUSES OR TABLES OF THE IN SURER. IN THIS REGARD, THIS WAS THE SUBMISSION OF LEARNED A. R. OF THE ASS ESSEE BEFORE US THAT COMMISSION WAS NOT PAID TO THE INSURED PERSONS AS A REBATE OR COMMISSION AGAINST THE POLICY PURCHASED BY HIMSELF. HE SUBMIT TED THAT ALTHOUGH THE PAYMENT WAS MADE TO THOSE PERSONS WHO HAD PURCHASED SOME POLICY FROM THE INSURANCE COMPANY BUT THIS IS NOT FOR THE SAME POLICY WHICH WAS PURCHASED BY THE CONCERNED PERSON BUT IN RESPECT OF OTHER POLICIES PURCHASED BY OTHER PERSONS WHO WERE INTRODUCED BY S UCH PERSON TO THE ASSESSEE AND THEREFORE, SECTION 41 OF THE INSURANCE ACT, 1938 IS NOT APPLICABLE IN THE PRESENT CASE. HE ALSO PLACED REL IANCE ON THE FOLLOWING TRIBUNAL ORDERS: (I) ACIT VS. SHRI NARAYAN M. SHETTY, I.T.A. NO.1081/AHD /2012 DATED 31/05/2013 (II) DCIT VS. RAJRANI EXPORTS PVT. LTD., I.T.A. NO.1402/ KOL/2011 DATED 31/05/2012 (III) NSIL EXPORTS LIMITED VS. DCIT, I.T.A. NO.3050 TO 3052/MUM/2013, DATED 21/02/2014 6. IT WAS ALSO SUBMITTED THAT THE DETAIL OF COMMISS ION PAID IS AVAILABLE ON PAGES 16-50 OF THE PAPER BOOK AND THE DETAILS OF POLICY HOLDERS FOR ASSESSMENT YEAR 2009-10 ARE AVAILABLE ON PAGES 51-6 6 OF THE PAPER BOOK. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HA VE TO FIRST EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 41 O F INSURANCE ACT, 1938. AS PER THE PROVISIONS OF THIS SECTION, NO REBATE OR CO MMISSION CAN BE PAID TO ANY PERSON DIRECTLY OR INDIRECTLY TO TAKE OUT OR RE NEW OR CONTINUE AN INSURANCE IN RESPECT OF ANY KIND OF RISK. HENCE, I T COMES OUT THAT SUCH REBATE OR COMMISSION SHOULD NOT BE ALLOWED TO A PER SON WHO IS PURCHASING AN INSURANCE POLICY IN RESPECT OF THE SAME POLICY P URCHASED BY HIM BECAUSE 4 THEN ONLY IT WILL AMOUNT TO ALLOWING A REBATE OR CO MMISSION TO INDUCE A PERSON TO TAKE OUT OR RENEW OR CONTINUE AN INSURANC E POLICY BUT IF SUCH REBATE OR COMMISSION IS PAID TO A PERSON IN RESPECT OF INSURANCE POLICY TAKEN OUT OR RENEWED BY SOME OTHER PERSON THEN IN O UR CONSIDERED OPINION, THE PROVISIONS OF SECTION 41 OF INSURANCE ACT, 1938 ARE NOT HIT. IN THE PRESENT CASE, A CLEAR FINDING HAS BEEN GIVEN BY CIT (A) IN PARA 11 OF HIS ORDER THAT THE ASSESSING OFFICER HAS NOT DISPUTED T HE SERVICES RENDERED BY THESE PERSONS TO WHOM PAYMENT WAS MADE ON ACCOUNT O F BROKERAGE/ COMMISSION IN LIEU OF THE SERVICES RENDERED. HENCE , IT IS SEEN THAT THE PAYMENT OF COMMISSION IS MADE ON THE SERVICES RENDE RED BY THESE PERSONS AND NOT AS INDUCEMENT FOR PURCHASING THE POLICY BY THEM. THIS CATEGORICAL FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LEAR NED D. R. OF THE REVENUE AND THEREFORE, WE FIND NO REASON TO INTERFE RE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. GROUND NO. 2 IS ALSO RE JECTED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED:12/01/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT . REGISTRAR