ACIT, New Delhi V. M/s. Impulse International Pvt. Ltd., New Delhi

ITA 4994/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2415 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANISHA SHARMA
• Keywords: Business income; TDS; Rule 8D
• Section: 14A; 10(10D)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.2564/DEL/2013 ASSESSMENT YEAR: 2009-10 DCIT CIRCLE 11 (1) NEW DELHI VS IMPULSE INTERNATIONAL PVT. LTD. M- 70, GREATER KAILASH NEW DELHI -110048 PAN NO. AAACI7150G (APPELLANT) (RESPONDENT) ITA NO.2394/DEL/2014 ASSESSMENT YEAR: 2009-10 IMPULSE INTERNATIONAL PVT. LTD. PLOT NO.41, ECHELON INSTITUTIONAL AREA, SECTOR-32, GURGAON PAN NO. AACCN1760B VS JCIT RANGE- II GURGAON (APPELLANT) (RESPONDENT) ITA NO.6155 TO 6156/DEL/2014 ASSESSMENT YEAR: 2010-11 DCIT CIRCLE 11 (1) NEW DELHI VS IMPULSE INTERNATIONAL PVT. LTD. M- 70, GREATER KAILASH-I NEW DELHI -110048 (APPELLANT) (RESPONDENT) ITA NO.5454/DEL/2011 ASSESSMENT YEAR: 2006-07 DCIT CIRCLE 11 (1), ROOM NO.312, C. R. BUILDING NEW DELHI VS IMPULSE INTERNATIONAL PVT. LTD. B-12, NIZAMUDIN WEST, NEW DELHI -110013 PAN NO. AAACI7150G (APPELLANT) (RESPONDENT) ITA NO.4994/DEL/2015 ASSESSMENT YEAR: 2011-12 ACIT CIRCLE 12 (1) ROOM NO.405, C. R. BUILDING I. P. ESTATE, NEW DELHI VS IMPULSE INTERNATIONAL PVT. LTD. B-12, NIZAMUDDIN WEST NEW DELHI 110013 PAN NO. AAACI7150G (APPELLANT) (RESPONDENT) REVENUE BY SH. AMIT KATOCH, SR. DR ASSESSEE BY MS. MANISHA SHARMA, ADVOCATE DATE OF HEARING: 23/01/2019 DATE OF PRONOUNCEMENT: 12/03/2019 2 ORDER PER B. R. R. KUMAR, AM: THE ISSUES INVOLVED IN THE GROUNDS OF THE APPEALS A RE COMMON IN ALL THE CASES, HENCE THEY ARE BEING DEALT ISSUE WISE INSTEA D OF GROUND WISE. GROUNDS RELATING TO COMMISSION TO DIRECTORS 2. THE ASSESSEE COMPANY IS A BUYING AGENT IN RESPEC T OF ABROAD BASED CLIENTS AND ENGAGED IN THE BUSINESS OF CONSULTANCY AND COMMISSION INCOME. 3. DURING THE ASSESSMENT YEAR THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS PAID COMMISSION EXPENSES WHICH HAVE BEEN IN EXCESS OF THE MARKET RATES AND DISALLOWED THE AMOUNT UNDER SECTION 36(1)(II). THE ASSESSING OFFICER HAS CONSIDERED THAT AN AMOUNT OF 15% INCREASE IS ADEQUATE AND THE REMAINING AMOUNT IS HELD TO BE UNREASONABLE AND EXCESSIVE AND MADE ADDITION UNDER THE PROVISIONS OF SECTION 40A(2)(B) . FOR THE A.Y. 2010-11 THE ASSESSING OFFICER HAS ALSO HELD THAT THE ASSESSEE H AS TRIED TO EVADE DIVIDEND DISTRIBUTION TAX UNDER SECTION 115-O BY THE WAY OF GIVING THE COMMISSION WHICH IS FAR MORE EXCESSIVE. 4. WE HAVE GONE THROUGH THE RECORDS BEFORE US AND T HE SUBMISSIONS OF THE ASSESSEE TAKEN BEFORE LOWER AUTHORITIES. 5. THE COMMISSION WAS PAID TO THE DIRECTORS NAMELY SHRI. RAJIV SURI, SHRI. SUNIL ARORA AND SMT. JYOTSNA SURI IN VARIOUS YEARS. THE Q UALIFICATIONS AND CONTRIBUTIONS ARE AS UNDER: (I) MR. RAJIVE SURI-MANAGING DIRECTOR HE IS THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND HAS OVER 32 YEARS OF EXPERIENCE WORKING IN THE APPAREL INDUSTRY AND HAS EXCELLENT RELATIONS WITH RENOWNED INTERNATIONAL RETAIL CHAINS IN EUROPE AND AMERICA. THE SERVICES PROVIDED BY HIM ARE AS UNDER: GUIDING THE ASSESSEE AND PROVIDING STRATEGIC INPUTS FOR THE GROWTH AND DEVELOPMENT OF THE BUSINESS OF THE ASSESSEE. NEGOTIATION OF THE BUYING AGENCY TERMS WITH THE OVE RSEAS BUYERS. CLIENT RELATIONSHIP WITH OVERSEAS BUYERS, SERVICE PROVIDED BY MRS. JYOTSNA SURI DIRECTOR (II). MS. JYOTSNA SURI DIRECTOR SHE HAS EXPERIENCE OF OVER 30 YEARS IN THE APPAREL INDUSTRY. THE SERVICES PROVIDED BY HER ARE AS UNDER: I. DESIGNING & DEVELOPMENT II. QUALITY CONTROL 3 III ASSISTING IN FUNCTIONAL EXPERTISE TO ENSURE THAT TH E EXPORT ORDERS PROCURED FROM THE OVERSEAS BUYERS ARE EXECUTED IN TIME. IV. SUPPLY CHAIN MANAGEMENT (III) MR. SUNIL ARORA HE, AS A DIRECTOR HAS EXPERIENCE OF OVER 25 YEARS I N THE APPAREL INDUSTRY AND HAS INSTRUMENTAL IN FURTHER DEVELOPING ITS BUSINESS. T HE SERVICES PROVIDED BY ARE AS UNDER: MARKETING AND PROCUREMENT OF EXPORT ORDERS. NEGOTIATION OF THE BUYING AGENCY TERMS WITH THE OVE RSEAS BUYERS CLIENT RELATIONSHIP WITH THE OVERSEAS BUYERS SUPPLY CHAIN MANAGEMENT 6. IT WAS SUBMITTED THAT THE ASSESSEE IS IN THE BUY ING HOUSE TRADE WHICH IS MORE THAN 40 YEARS OLD, THERE ARE ONLY A FEW COMPAN IES WHICH HAVE ATTAINED THE SIZE OF THE ASSESSEE IN TERMS OF THE EXPORT ORD ERS EXECUTED AND COMMISSION EARNED THEREON. IT WAS STATED THAT THE ASSESSEE IS AMONG THE TOP 10 BUYING HOUSES IN INDIA WHICH INCLUDE GLOBAL GIANTS LIKE WI LLIAM CONNORS AND LI & FUNG WHICH HAS BEEN POSSIBLE PURELY DUE TO THE EFFORTS M ADE BY THE DIRECTORS AND THEIR CONTACTS WITH THE OVERSEAS BUYERS. CONSIDERIN G THE CONTRIBUTION MADE BY ABOVE DIRECTORS FOR THE GROWTH AND DEVELOPMENT OF B USINESS OF THE ASSESSEE AND SERVICES RENDERED BY THEM, THE ASSESSEE HAS PAI D THE ABOVE AMOUNT OF COMMISSION TO THEM. FURTHER ON THE ALLEGATION THAT THE EXCESS PAYMENT O F COMMISSION IS MADE IN LIEU OF DIVIDEND INCOME, IT WAS SUBMITTED BEFORE THE LD. CIT(A) WHICH IS REPRODUCED AS UNDER: 'IT IS SUBMITTED THAT MR. RAJIVE SURI, CHAIRMAN OF THE ASSESSEE IS HAVING EXPERIENCE OF OVER 32 YEARS IN THE BUYING AGENCY BUSINESS AND HOLDS 16.52% SHARES IN THE ASSESSEE WHILE THE MANAGING DIRECTOR, MR. SUNIL ARO RA AND THE DIRECTOR MRS. JYOTSNA SURI HELD 19.96% AND 16.28% SHARES RESPECTI VELY IN THE ASSESSEE. THE ASSESSEE HAS PAID COMMISSION OF RS.4,56,22,500/- TO MR. RAJIVE SURI WHILE COMMISSION OF RS.94,01,000/- AND RS.1,17,51,250/- W AS PAID TO MR. SUNIL ARORA AND. JYOTSNA SURI, RESPECTIVELY. THIS ITSELF PROVES THAT THE COMMISSION PAID TO THE DIRECTORS HAS NO RELATION TO THE SHARES HELD BY THE M IN THE ASSESSEE. IT IS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS FORMED AN OPINION ON AN ARBITRARILY BASIS WITHOUT BRINGING ANY DOCUMENTARY EVIDENCE ONR ECORD TO SHOW THAT THE COMMISSION PAID TO THE DIRECTORS IS UNREASONABLE AN D HIGHLY EXCESSIVE. THE LD ASSESSING OFFICER HAS WRONGLY AND ERRONEOUSLY CONCL UDED ON ASSUMPTIONS AND PRESUMPTIONS THAT THE COMMISSION PAID TO THEM WAS F OR THE INVESTMENT MADE BY THEM IN THE ASSESSEE AND NOT FOR THE SERVICES RENDE RED BY THEM WITHOUT BRINGING ANY DOCUMENTARY EVIDENCE ON RECORD. THE LD ASSESSIN G OFFICER HAS FAILED TO APPRECIATE THE FACT THAT THE COMMISSION PAID TO THE DIRECTORS WAS FOR THE ACTUAL SERVICES RENDERED BY THEM AND NOT FOR THE INVESTMEN T MADE BY THEM IN THE ASSESSEE. THE LD. A.O. HAS NOT HELD ANY WHERE IN TH E ASSESSMENT ORDERS THAT THE TWO DIRECTORS DID NOT RENDER SERVICES TO THE ASSESS EE. 4 7. IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT I F COMMISSION HAS BEEN PAID TO AN EMPLOYEE, IN LIEU OF SERVICES RENDERED, SAME IS DEDUCTIBLE WITHOUT ANY RESTRICTION. IF SUCH EMPLOYEE HAPPENS TO BE A SHARE HOLDER, DEDUCTION UNDER SECTION 36 (1) (II) OF THE ACT IS ALSO ALLOWED, IF BONUS OR COMMISSION WAS PAID IN LIEU OF SERVICES RENDERED BY THE EMPLOYEE/DIRECTOR AND NOT BY WAY OF SHARE OF PROFIT. 7.1 IT IS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS ARBITRARILY FORMED AN OPINION THAT THE COMMISSION IF NOT PAID, WOULD HAVE BEEN PAYABLE AS DIVIDEND IGNORING THE FACT THAT THE PAYMENT OF DIVIDEND IS U NDER THE PROVISIONS OF COMPANIES ACT AND IS WITHIN THE DISCRETIONARY POWER S OF THE BOARD. A SHAREHOLDER OF A COMPANY MAKES AN INVESTMENT WHEN H E PURCHASES SHARES AND IS ENTITLED TO DIVIDEND ON THE SAID INVESTMENT. DIVIDEND IS PAYABLE AS PER AND IN ACCORDANCE WITH THE PROVISIONS OF THE COMPAN IES ACT, 1956. THE BOARD PROPOSES PAYMENT OF DIVIDEND AND THE RATE THEREOF A ND THEREAFTER IT IS APPROVED BY THE SHAREHOLDERS. IT IS SUBMITTED THAT IT IS NOT MANDATORY TO PAY DIVIDEND AND MOREOVER, THE COMPANIES ACT, 1956 DOES NOT STIPULATE THAT DIVIDEND MUST BE PAID. PAYMENT OF SALARY TO THE DIR ECTORS IS FOR THE WORK AND ACTUAL SERVICES RENDERED BY THEM TO THE COMPANY. IT IS A CONTRACTUAL OBLIGATION BUT CAN BE REGULATED BY LAW. IT IS FURTHER SUBMITTE D THAT THE NATURE OF THE TWO PAYMENTS, I.E. 'DIVIDEND' AND 'SALARY' ARE ENTIRELY DIFFERENT. 7.2 IT IS SUBMITTED THAT THERE IS NO BASIS OR MATER IAL OR EVIDENCE BROUGHT ON RECORD BY ASSESSING OFFICER TO SUPPORT THIS CONTENT ION THAT THE COMMISSION WOULD HAVE BEEN PAID AS DIVIDEND TO THE SHAREHOLDER S. COMPANIES ACT, 1956 CONTAINS THE LIMITATIONS AND RESTRICTION IN THE MAT TER OF PAYMENT OF DIVIDEND AND SUCH DISCRETION OF THE COMPANY EITHER TO PAY OR NOT TO PAY DIVIDEND CANNOT BE ASSUMED. ASSESSING OFFICER CANNOT PRESUME THAT HAD THIS COMMISSION NOT BEEN PAID, THIS WOULD HAVE NECESSARILY BEEN PAID AS DIVI DEND TO THE SHAREHOLDERS. THERE IS NO BASIS FOR THIS ASSUMPTION . 8. LD. DR STRONGLY SUPPORTED THE ORDERS OF THE ASSE SSING OFFICER. 9. PRIMARILY WE ALSO HOLD THAT THE REVENUES CONTEN TION THAT THE ASSESSEE IS BOUND BY SECTION 198 AND SECTION 309 OF THE COMPANI ES ACT, IS NOT APPLICABLE OWING TO THE READING OF THE RELEVANT PROVISIONS. TH E PROVISIONS READ AS UNDER: SECTION 198(1) IN THE COMPANIES ACT, 1956 (1) THE TOTAL MANAGERIAL REMUNERATION PAYABLE BY A PUBLIC COMPANY OR A PRIVATE COMPANY WHICH IS A SUBSIDIARY OF A PUBLIC COMPANY, TO ITS DIRECTORS AND ITS 5 MANAGING AGENT, SECRETARIES AND TREASURERS OR MANAG ER IN RESPECT OF ANY FINANCIAL YEAR SHALL NOT EXCEED ELEVEN PER CENT. OF THE NET PROFITS OF THAT COMPANY FOR THAT FINANCIAL YEAR COMPUTED IN THE MAN NER LAID DOWN IN SECTIONS 349, 350 AND 351, EXCEPT THAT THE REMUNERATION OF T HE DIRECTORS SHALL NOT BE DEDUCTED FROM THE GROSS PROFITS: PROVIDED THAT NOTH ING IN THIS SECTION SHALL AFFECT THE OPERATION OF SECTIONS 352 TO 354 AND 356 TO 360 . SECTION 309 IN THE COMPANIES ACT, 1956 309. REMUNERATION OF DIRECTORS. (1) THE REMUNERATION PAYABLE TO THE DIRECTORS OF A COM PANY, INCLUDING ANY MANAGING OR WHOLE- TIME DIRECTOR, SHALL BE DETERMIN ED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SECTION 198 AND THIS S ECTION, EITHER BY THE ARTICLES OF THE COMPANY, OR BY A RESOLUTION OR, IF THE ARTICLES SO REQUIRE, BY A SPECIAL RESOLUTION, PASSED BY THE COMPANY IN GENERAL MEETIN G 1 AND THE REMUNERATION PAYABLE TO ANY SUCH DIRECTOR DETERMINED AS AFORESAI D SHALL BE INCLUSIVE OF THE REMUNERATION PAYABLE TO SUCH DIRECTOR FOR SERVICES RENDERED BY HIM IN ANY OTHER CAPACITY: PROVIDED THAT ANY REMUNERATION FOR SERVIC ES RENDERED BY ANY SUCH DIRECTOR IN ANY OTHER CAPACITY SHALL NOT BE SO INCL UDED IF- (A) THE SERVICES RENDERED ARE OF A PROFESSIONAL NATURE , AND (B) IN THE OPINION OF THE CENTRAL GOVERNMENT, THE DIRE CTOR POSSESSES THE REQUISITE QUALIFICATIONS FOR THE PRACTICE OF, THE PROFESSION] . 9.1 THE ABOVE PROVISIONS OF SECTION 198 AND 309 ARE NOT APPLICABLE TO THE ASSESSEE COMPANY AS THE ASSESSEE BEING NEITHER A PU BLIC COMPANY NOR A PRIVATE COMPANY WHICH IS THE SUBSIDIARY OF A PUBLIC COMPANY HENCE ARE NOT APPLICABLE AND NEITHER RECEIVED ANY PAYMENT BEYOND THE PROVISIONS OF SUB SECTION 1(A) OF SECTION 309. 9.2 FURTHER WE ALSO FIND THAT AS PER THE BOARD RESO LUTION MAXIMUM COMMISSION OF 27% OVER THE TURNOVER CAN BE PAID TO THE DIRECTORS WHEREAS THE TOTAL PAYMENTS IS ONLY 1.25% OF THE VALUE OF THE EX PORT ORDERS ACHIEVED BY THEM. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON R ECORD NOR GATHERED ANY EVIDENCE ABOUT THE CONTRIBUTION OF THE DIRECTORS WH ICH GOES CONTRA TO THE PAYMENTS THEY RECEIVED. THE ASSESSING OFFICER HAS N OT BROUGHT ANY COMPARATIVE CASES TO DETERMINE AS TO HOW THE COMMIS SION PAID TO THE DIRECTORS IS EXCESSIVE. THERE IS NO DOUBT ABOUT THE QUALIFICA TIONS AND CONTRIBUTION OF THE DIRECTORS FOR OBTAINING THE ORDERS AND INCREASING T HE TURNOVERS. THE PAYMENT OF COMMISSION HAS BEEN THE PRACTICE OF THE COMPANY FOR THE PAST SEVEN YEARS. THE DIRECTORS WHO HAVE BEEN RECEIVING THE COMMISSION AR E ALSO PAYING TAX AT THE MAXIMUM MERCHANT RATE SO AS THE COMPANY HENCE NO RE VENUE LEAKAGE COULD ALSO BE FOUND BASED ON THE TAX PAYMENTS. EVEN THE D IVIDEND DISTRIBUTION TAX IN THE HANDS OF THE COMPANY @ 12.5% AND TAX FREE IN TH E HANDS OF THE RECIPIENT WOULD NOT BE GIVE ANY CREDENCE TO THE ALLEGED SURRE PTIOUS TAX PLANNING. INCREASE IN PERSONAL EXPENSES AND COMPARING IT WITH THE INCREASE IN DIRECTORS REMUNERATION CANNOT BE ACCEPTED AS A METHODOLOGY TO CALCULATE THE REASONABLE REMUNERATION. THE COMPANY CAN DETERMINE THE RATES OF SALARY, 6 REMUNERATION, COMMISSION AS LONG AS IT DOESNT INFA RCT ANY LAW ENFORCE WHICH IS THE CASE OF THE ASSESSEE. HENCE WE HEREBY DELETE TH E ADDITION MADE BY THE ASSESSING OFFICER AND HOLD THAT NO INTERFERENCE IS CALLED FOR PERTAINING TO THE COMMISSION PAID BY THE ASSESSE TO THE DIRECTORS. 10. THIS DECISION IS APPLICABLE TO ALL THE APPEALS INVOLVING THE ISSUE OF COMMISSION TO THE DIRECTORS UNDER SECTION 40A(2)(B) AND 36(1)(II). GROUNDS RELATING TO DISALLOWANCE UNDER SECTION 14A: 11. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSE E COMPANY HAD RECEIVED DIVIDEND INCOME OF RS.36,67,907/- AND WHEN ASKED TO EXPLAIN AS TO WHY DISALLOWANCE UNDER RULE 8D MAY NOT BE MADE, THE ASS ESSEE EXPLAINED THAT IT HAD ALREADY DISALLOWED AN AMOUNT OF RS.8,85,254/- U /S 14A. THE ASSESSING OFFICER HOWEVER, WAS NOT SATISFIED WITH THE SAME, W HO HELD THAT THE DISALLOWANCE U/S 14A HAS TO BE MANDATORILY MADE UND ER RULE 8D. ACCORDINGLY, BY INVOKING RULE 8D, DISALLOWED AN AMOUNT OF RS.9,9 8,009/- AND THEREBY, MADE AN ADDITION OF RS.1,12,755/-. 12. DURING THE HEARING BEFORE US, LD. DR REITERATED THE CONTENTS OF THE ASSESSMENT ORDER. 13. WE FIND FROM THE DOCUMENTS SUBMITTED BEFORE THE REVENUE, THAT AS PER THE COMPUTATION OF INCOME FILED, THE ASSESSEE HAD M ADE DISALLOWANCE UNDER RULE 8D, WHICH INCLUDES THE AMOUNT M/S IMPULSE INTE RNATIONAL PVT. LTD. DISALLOWANCE OF RS.53,326/- UNDER SUB-RULE (2)(I), THEREOF, TOWARDS STT BEING DIRECT EXPENSES INCURRED FOR EARNING DIVIDEND INCOM E. IN RESPECT OF ADMINISTRATIVE EFFORTS, IN THE ABSENCE OF ANY IDENT IFIABLE ITEMS, THE ASSESSEE HAD ADOPTED DISALLOWANCE UNDER SUB-RULE (2) (III) EQUAL TO 0.5% OF 'AVERAGE INVESTMENT' AGGREGATING TO RS.8,31,928/-. IT WAS SU BMITTED THE DISALLOWANCE MADE BY THE LD. AO UNDER RULE 8D(2)(II) WAS NOT CAL LED FOR. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN INTEREST EXP ENSES OF RS.1,01,664/- UNDER SUB-RULE (2)(II) WHICH INCLUDE BANK CHARGES OF RS.6 5,401/-, INTEREST EXPENSE ON CAR LOAN OF RS.34,577/- AND INTEREST ON LATE DEPOSI T OF TDS RS.1,686/-. IT WAS SUBMITTED THAT AS NONE OF THESE EXPENSES HAD ANY RE LATIONSHIP WITH EARNING OF DIVIDEND INCOME BUT WERE DIRECTLY RELATED TO OTHER PURPOSES, THERE WAS NO JUSTIFICATION IN THE ACTION OF THE ASSESSING OFFICE R OF APPLYING THE PROVISION OF RULE 8D(2)(II). 14. ON GOING THROUGH THE FACTS ON RECORD WE HOLD TH AT AS PER THE SCHEME OF 7 SECTION 14A(2), IT IS DUTY CAST UPON THE AO TO EXAM INE THE CLAIM OF ASSESSEE HAVING REGARDS THE ACCOUNT AND ONLY WHERE THE ASSES SING OFFICER IS NOT SATISFIED, WHICH SHOULD BE ON COGENT GROUND, WITH T HE CLAIM OF THE ASSESSEE, THAT THE ASSESSING OFFICER SHOULD FOLLOW THE PRESCR IBED PROCEDURE UNDER RULE 8D. THE ASSESSEE'S PLEA BEFORE THE AO WAS THAT IN RESPE CT OF AN AMOUNT OF RS.53,326/- WHICH, BEING STT PAYMENT, IS DIRECTLY R ELATED TO THE DIVIDEND INCOME, DISALLOWANCE WAS ALREADY MADE BY THE ASSESSEE UNDER RULE 8D(2)(I) WHILE IN RESPECT OF ADMINISTRATIVE EXPENSES, IT HAD FOLLOWED THE WORKING AS PER RULE 8D(2)(III), WHEREBY AN AMOUNT OF RS.8,31,928/- WAS DISALLOWED. THE ASSESSING OFFICER DID NOT EXAMINE THIS PLEA IN NOR COULD FIND ANY FAULT IN THE CLAIM OF THE ASSESSEE HAVING REGARDS TO ITS ACCOUNT. THE INTERPR ETATION OF THE AO REGARDING THE APPLICABILITY OF THE PROVISIONS OF RULE 8D IS C ERTAINLY INCORRECT AND NOT IN ACCORDANCE WITH THE LAW AS INTERPRETED BY THE HON'B LE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD. SINC E THE AO DID NOT RECORD ANY SATISFACTION ON REGARDING THE CLAIM OF THE ASSESSEE HAVING ITS A CCOUNTS, THE AO WAS NOT EMPOWERED TO INVOKE RULE 8D AT THE FIRST PLACE. ACC ORDINGLY, THE ACTION OF THE AO OF MAKING DISALLOWANCE THERE UNDER IS NOT JUSTIF IED. ON FACTS, THE ASSESSEE HAS GIVEN DETAILS OF INTEREST EXPENSES, NONE OF WHI CH HAD ANY NEXUS WITH THE DIVIDEND INCOME. ACCORDINGLY, NO DISALLOWANCE UNDER RULE 8D(2)(II) WAS CALLED FOR. EVIDENTLY, THE ASSESSEE HAD ALREADY MADE DISAL LOWANCE UNDER SUB-CLAUSE (I) AND (III) OF RULE 8D(2), THEREFORE, NO FURTHER DIS ALLOWANCE WAS CALLED FOR U/S 14A. HENCE WE TOTALLY CONCUR WITH THE DECISION OF THE LD . CIT (A) IN DELETING THE ADDITION MADE UNDER SECTION 14A. GROUNDS RELATING TO SHORT TERM CAPITAL GAINS: 15. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAD EARNED PROFIT ON TRADING OF SHARES AMOUNTING TO RS.9,64,305/- ON WHICH SHORT TERM CAPITAL GAIN WAS OFFERED TO TAX . ON FINDING THAT THE ASSESSEE WAS TRADING IN SHARES ON A REGULAR BASIS A ND BASED ON THE REVENUES STAND IN THE EARLIER YEARS THAT THE ASSESSEE INDUL GES IN INTRA-DAY TRADING, THE ASSESSING OFFICER HELD THE PROFIT ON TRADING OF SHA RES BE TREATED AS BUSINESS INCOME. 16. WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADD ITION ON A FACTUAL GROUND HOLDING THAT THE ASSESSEE HAS ALREADY PAID TAX @30% ON THE AMOUNT OF RS. 9,36,208/- OUT OF THE TOTAL PROFITS AMOUNTING TO RS . 9,64,305/-. HENCE THERE WAS NO NEED TO CONVERT THE CAPITAL GAINS INTO BUSINESS INCOME. THE BALANCE 8 AMOUNT WAS EARNED OUT OF SALE OF SECURITIES AND MUT UAL FUNDS. SINCE IT WAS FOUND BY THE AUTHORITIES BELOW THOSE DELIVERIES WER E DULY TAKEN AND PERIOD OF HOLDING WAS SUBSTANTIAL, IN THE ABSENCE OF ANY CONT RARY FINDINGS ON RECORD WE HEREBY DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). GROUNDS RELATING TO DISALLOWANCE OF RENT 17. THE ASSESSEE HAS PAID RENT TO M/S IMPULSE INDIA (P) LTD IN RESPECT OF THE PREMISES AT PLOT NO.41, SECTOR-32, 'ECHELON' INSTIT UTIONAL AREA, GURGAON,. THE ASSESSING OFFICER HAD RESTRICTED THE RENT AT THE SA ME RATE ON WHICH ANOTHER PREMISES WAS HIRED BY THE ASSESSEE, AT JMD PACIFIC SQUARE, SECTOR-15, GURGAON. IT WAS SUBMITTED THAT THE TWO PREMISES ARE LOCATED AT DIFFERENT LOCATIONS AND THE PREMISE AT ECHELON INSTITUTIONAL AREA IS LOCATE D AT A PRIME LOCATION, THEREFORE, THE RENT IN RESPECT OF THEM COULD NOT BE COMPARED. FURTHER, IN RESPECT OF THE PREMISE AT JMD PACIFIC SQUARE, SECTO R-15, GURGAON, MAINTENANCE CHARGES IN RESPECT OF PREMISES WERE TO BE SEPARATELY BORNE BY THE ASSESSEE COMPANY, OF RS.70,745/- PER MONTH, HOW EVER IN THE CASE OF THE PROPERTY AT SECTOR-32, GURGAON, THE MAINTENANCE CHA RGES WERE INCLUDED IN THE RENT AND IF THIS FACT TAKEN INTO ACCOUNT, THERE WOU LD HARDLY BE ANY DIFFERENCE BETWEEN THE TWO PREMISES. THE LD. CIT(A) DELETED TH E ADDITION BASED ON THE ORDERS IN THE CASE OF THE ASSESSEE FOR THE A.Y. 200 7-08 AND 2008-09. THE LD. CIT(A) ALSO HELD THAT THERE WAS NO EXCESSIVE OR UNR EASONABLE PAYMENT TO RELATED PERSONS AS PER THE PROVISIONS OF SECTION 40 A(2)(B). SINCE WE FIND THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE PAYMENT OF THE MAINTENANCE CHARGES, LOCATION, AND APPLICABILITY OF THE PROVISIONS OF SE CTION 40A(2)(B) AND SINCE NO EVIDENCE REGARDING UNREASONABLENESS OF THE RENT PAI D HAS BEEN BROUGHT ON RECORD WE HEREBY DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). GROUNDS RELATING TO KEYMAN INSURANCE POLICY: 18. THE PROVISIONS OF SECTION 28(VI) OF THE ACT REA D WITH SECTION 2(24)(XI) RELATING TO BONUS ON KEYMAN INSURANCE POLICY INCLUD ES: 'ANY SOME RECEIVED UNDER A KEYMAN INSURANCE POLICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS IN SUCH POLICY.' 19. THE PROCEEDS FROM LIC ARE EXEMPT UNDER SECTION 10(10D) EXCEPT IN THE FOLLOWING 3 CASES: 9 1. IF AMOUNT IS RECEIVED ON A KEYMAN INSURANCE POLICY . 2. IF AMOUNT IS RECEIVED FROM A PENSION POLICY. 3. IF PREMIUM PAID IS MORE THAN 20% OF SUM ASSURED IN ANY YEAR. 20. IN VIEW OF ABOVE, THE PROCEEDS FROM INSURANCE C OMPANY IN RESPECT OF KEYMAN POLICY WILL BE TAXABLE ONLY ON RECEIPT BASIS . THE PROVISIONS OF SECTION 2(24)(XI) READ WITH SECTION 28(VI), IT IS EVIDENT T HAT THE AMOUNT OF BONUS ON KEYMAN INSURANCE POLICY IS TO BE TAXED ON RECEIPT B ASIS ONLY. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER TAXING THE I NCOME ON ACCRUAL BASIS CANNOT BE HELD TO BE VALID IN THE EYES OF THE LAW. HENCE WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 21. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUES APPEAL ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 12 .03.2019. SD/- SD/- (KULDIP SINGH) (DR. B. R. R KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 12-03-2019. COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER ASSISTANT REGISTRAR ITAT, NEW DELHI