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2019 (11) TMI 646 - AT - Income TaxAddition on account of commission income - miscellaneous income - HELD THAT:- Sale/ purchase/ investment/ loans made from bogus parties i.e. outside parties is to the extent of ₹ 97,42,41,410/- and addition on balance turnover of ₹ 56,47,72,218/- which is made from outside parties is already estimated at the rate of 1%. We also noted that foreign exchange fluctuation, interest income, sundry debtors written off and profit on sale of unquoted shares, the assessee company had credited miscellaneous income of ₹ 4,07,18,363 to its profit and loss account and since all loans and advances given and share held by the assessee company are not genuine, the income derived there from is also not genuine and represented the commission income accrued to the assessee. Apart from foreign exchange fluctuation other components of other income aggregating to ₹ 3,66,32,003/- credited to profit and loss account represented commission income and CIT(A) computed the assessable commission income being 1% of the aggregate of new investments and sales to outside parties and held that since the assessee company has already offered income which is more than the commission income, no further addition can be made in the hands of the company. Hence, we find no infirmity in the order of the CIT(A). Adhoc disallowance being 10% of salary expenses incurred by the appellant company on the pretext that the profit of 0.375% on HR Services rendered by the appellant company is very low - HELD THAT:- We noted that AO as well as CIT(A) has just on the basis of presumption made disallowance just on adhoc basis. No reason whatsoever is cited, hence, we are of the view that this disallowance confirmed by CIT(A) on adhoc basis of ₹ 26,23,800/- is without basis. Hence, we delete the disallowance and allow the appeal of the assessee. Disallowance of expenses being ROC fee paid on further public issue of bogus shares - HELD THAT:- Total expenses for issue of bonus share capital is amounting to ₹ 56,52,580/- out of the total expenses incurred for increase in authorized share capital at ₹ 86,80,163/-. It means that this amount of ₹ 56,52,580/- cannot be allowed being expenses incurred for issue of bonus share capital being capitalization of reserve merely by reallocation of companies funds and there was no inflow of fresh funds or increase in capital employed. Therefore, we are of the view it could not be said that the assessee company has acquired a benefit or advantage of enduring nature and the total funds available with the company would remain the same and issue of bonus share would not result in expansion of capital base of the assessee company. Therefore, we are of the view that the expenditure incurred on issue of bonus share would be revenue expenditure allowable. For balance sum of ₹ 30,27,583/-, we are of the view that this is increase in share capital and will not be allowed. This issue of the assessee’s appeal is partly allowed.
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