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2014 (1) TMI 1431 - AT - Income TaxDeletion of Disallowance claimed on brokerage and commission Held that - The decision in Assistant Commissioner Of Income-tax Ahmedabad Circle - 1 Ahmedabad. Versus Ashima Syntex Limited. 2008 (10) TMI 298 - ITAT AHMEDABAD-B followed the CIT(A) after considering the submissions deleted the disallowance of commission/brokerage expenses - the nature of the expenditure treated as a deferred revenue expenditure in the books needs to be properly analysed before taking a view on its allowability or otherwise under the provisions of the Act - where the nature of the revenue expenditure is such that the same can be clearly and unambiguously identified over specified future time periods (e.g. discount on issue of debentures) akin to pre-paid expenses the same would be allowable over the period to which these relate proportionately - when the Tribunal has recorded a finding that the expenses relating to obtaining fixed deposits are closely linked with the business requirement of the assessee such expenses are allowable expenses thus the Tribunal was right in holding that the expenses for obtaining fixed deposits from the public is revenue in nature the order of the CIT(A) upheld Decided against Revenue.
Issues Involved:
Appeal against deletion of disallowance of brokerage and commission expenses amounting to Rs. 18,80,782. Detailed Analysis: Issue 1: Deletion of Disallowance of Brokerage and Commission Expenses The appeal by the Revenue was against the order of the Ld. Commissioner of Income Tax(Appeals) pertaining to Assessment Year 1996-97. The Revenue challenged the deletion of disallowance of brokerage and commission expenses of Rs. 18,80,782, arguing that the expenses were incurred for an enduring benefit and were not debited to the Profit and Loss account. The case was taken up for scrutiny assessment, and the CIT(A) set aside the assessment order to the Assessing Officer. Subsequently, an order under section 143(3) of the IT Act was passed. The CIT(A), after considering submissions, deleted the disallowance. The Revenue appealed to the Tribunal, which was dismissed by the Co-ordinate Bench due to low tax effect. The matter was then taken to the High Court, which demanded consideration of the appeal on merits. Issue 2: Legal Arguments and Precedents During the proceedings, the Senior DR supported the assessment order, while the counsel for the assessee referred to a decision by the Hon'ble Special Bench of ITAT Ahmedabad Bench "B" in the case of ACIT vs. Ashima Syntex Ltd. The Special Bench's decision allowed the claim of brokerage expenses paid on fixed deposits. The Special Bench emphasized the need to analyze the nature of expenditure treated as deferred revenue expenditure before determining its allowability under the Act. The decision highlighted that expenses resulting in the creation of a capital asset could be treated as capital expenditure. In cases where expenses could be identified over specified future periods, they would be allowable proportionately. Issue 3: Tribunal's Decision The Tribunal reviewed the Special Bench's decision and held that expenses incurred for obtaining fixed deposits were closely linked with the business requirements of the assessee and were allowable as revenue expenditure. The Tribunal found no infirmity in the CIT(A)'s order and upheld the decision based on the Special Bench's precedent. The Senior DR did not challenge the Special Bench's decision, leading to the rejection of the Revenue's appeal. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the disallowance of brokerage and commission expenses based on the legal analysis and precedents presented during the proceedings.
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