TMI Blog2011 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... rfere with the order of the CIT(A) – Decided against the revenue. Deletion of disallowance u/s 40(a)(ia) by CIT(A) on ground that the payments were covered u/s 194J and not by the provision of section 194H - Held that:- If the assessee is able to produce evidence to show that the persons to whom the consultancy charges have been paid are registered with IRDA, then they are to be treated as payments made towards professional charges and will be governed by the provision of section 194J. In any other case, where payment is made by way of commission or otherwise for soliciting or procuring insurance business by persons who are not registered with IRDA, then the same will be governed by the provision of section 194D. If the deduction of TDS is not made in accordance with the above sections, then the amounts so paid is to be disallowed. The provision of section 194H would have no applicability as the business of the assessee is insurance broking and section 194H specifically excludes insurance commission. We, therefore, set aside the orders of lower authorities and remand the matter back to the file of the Assessing Officer for adjudicating the issue afresh in the light of the discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk management philosophy; b. Familiarising himself with the client's business and underwriting information so that this can be explained to an insurer and others; c. Rendering advice on appropriate insurance cover and terms; d. Maintaining detailed knowledge of available insurance markets, as may be applicable; e. Submitting quotation received from insurer/s for consideration of a client f. Providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover; g. Acting promptly on instructions from a client and providing him written acknowledgements and progress reports; h. Assisting clients in paying premium under section 64VB of Insurance Act 1938 (4 of 1938). i. Providing services related to insurance consultancy and risk management; j. Assisting in the negotiation of the claims; and k. Maintaining proper records of claims. Further where the broker himself is unable to give advice, he can seek or recommend other specialist for advice when necessary. 3. When the volume of business suddenly expands and the broker has to perform lot of functi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is allowable. ( c ) Business Promotion Expenses As explained above the expenses were incurred only for the purpose of business of the company. ( d ) Conveyance Expenses: As explained above the expenses were incurred only for the purpose of business of the company. ( e ) Consultancy Expenses: Expenses classified by us under the head "consultancy charges" were really incurred towards consultancy services provided by the payees. Insurance is a specialized field. Functions of a direct broker, inter-alia , include rendering advice on appropriate insurance cover and terms and maintaining detailed knowledge of available insurance markets, providing services related to insurance consultancy and risk management etc.,. Where the broker himself is unable to give advice, he has to seek advice from others for proper client service. We sought consultancy service from those who were well versed in the field of insurance. All the expenses incurred were towards. Fees for technical services within the meaning of clause (b) of the Explanation below section 194J read with Explanation to clause (vii) of the sub section (1) of section 9. There is no scope for treating these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company and Shriram Group of companies. The claim of expenses made by the assessee under each head with reference to the consolidated extracts of vouchers enclosed herewith and its admissibility is discussed as under: ( i ) Advertising: The assessee company has claimed an amount of Rs. l,81,040/-under the head Advertising. On a perusal of records, it is seen, that the advertisements were actually for recruitment for Shriram Group of Companies and not for RSIB which go to prove that the recruitments were made for Shriram Group for Companies at various places. The bills were also raised only in the name of Shriram Group of Companies. I therefore disallow the claim made as not related to the assessee company. Disallowance under this head - Rs. l,81,040/-. ( ii ) Entertainment charges Business Promotion: The assessee has claimed an amount of Rs. 5,758/- as Entertainment Expenses in its Profit and loss account, whereas as per the vouchers available in the impounded documents it is seen that the assessee company has incurred an amount of Rs. l,89,893/- under this head for the bills that which are not in the name of the assessee company. The argument of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster companies to the extent of Rs. 11,30,904/- is disallowed. Disallowance under this head: Rs. 11,30,9041- ( viii ) Training expenses: The assessee has Claimed a total expenses of Rs. 8,00,549/- On a perusal of the vouchers it is ascertained that an amount of Rs. 2,81,953/has been expended for the persons who are not the employees of RSIB. The argument of the assessee is not acceptable and I therefore disallow this amount. Disallowance under this head: Rs. 2,81,953/- ( ix ) Travelling expenses: The assessee has made a claim of Rs. 40,07,966/- in P L a/c under this head. The vouchers and bills claimed to the extent of Rs. 12,23,860/- are not raised in the name of RSIB as the same were incurred for the employees of Shriram Group of companies which have been paid by RSIB. As the assessee RSIB can claim only the expenditure that have been incurred for its employees, I disallow this amount of Rs. 12,23,860/- that has been incurred for another company. Disallowance under this head: Rs. 12,23,860/- ( x ) Books and periodicals: The assessee has claimed an amount of Rs. 72,277/- under this head for which the vouchers for Rs. 30,379/- are not in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advertising Expenses-(Sl.No.7(i) of the Assessment Order) 1,81,040 Business Promotion Expenses-(Sl.No.7(ii)of the Assessment Order) 2,59,536 Conveyance-Item (Sl.No. 7 (iii) of the Assessment Order) 9,99,134 Printing Stationery-(Sl. No.7(v) of the Assessment Order) 3,26,416 Repairs Maintenance-(Sl.No.7(vi) of the Assessment Order) 6,45,225 Staff Welfare Expenses (Sl. No.7(vii) of the Assessment Order) 2,87,855 Telephone Postage (Sl. No.7(viii) of the Assessment Order) 11,30,904 Traveling Expenses-(Sl. No.7(x) of the Assessment Order) 12,23,860 Books and periodicals (Sl. No.7(xi) of assessment order) 30,379" 7. The ld. DR relied on the order of the Assessing Officer and the ld. AR supported the order of the ld. CIT(A). 8. After considering the rival submissions and perusing the orders of the lower authorities and material available on record, we find that the only reason for making the disallowance by the Assessing Officer is that the expense vouchers are not in the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2500/- to various parties to the tune of Rs. 47,40,632/- without deducting tax u/s 194H and calls for disallowance u/s 40 (a)(ia). The payments are only in the nature of Commission or Brokerage as the nomenclature in the vouchers is 'Agent'. There is no payment which is technical or professional in nature in the said payments falling within the provisions of S. 194J. When this was put to the assessee's representative he has objected to the disallowance stating that the payments are covered u/s 194J read with Explanation to clause (vii) of sub section (1) of Section 9. The said Explanation does not cover the case of the assessee as there is no rendering of any managerial technical or consultancy services. The argument also does not hold good for the reason that the said payments are paid to agents and payments to agents are nothing but commission and cannot be termed as professional fees or consultancy charges. The nomenclature of expenses debited in the P L account does not determine the nature of the expense. Hence, the assessee having debited commission has claimed the same as consultancy charges. It is evident that the payments are to 'Agents' from the vouchers and print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Technical Services only within the meaning of clause (b) of the Explanation below sec. 194J r.w. Explanation 2 to clause (vii) of sub section 1 of section 9 and accordingly covered by the provisions of Sec. 194J of the IT Act and not under the provisions of Sec. 194H of the IT Act as- held by the learned AO. On similar set of facts, in the Appellant's case for the assessment year 2007-08 the undersigned has held that provisions of Sec. 194J are only attracted vide order in ITA No. 402/09-10 dated 13.08.2010. As all the payments are less than Rs. 20,000/- there is no necessity to deduct tax u/s. 194J of the IT Act. Hence, the disallowance made u/s 40(a)(ia) of Rs. 47,40,632 is deleted." 12. Both the parties, before us, at the time of hearing, agreed that the issue should be restored back to the file of the Assessing Officer for verification of the issue afresh for further verification as under. If the assessee is able to produce evidence to show that the persons to whom the consultancy charges have been paid are registered with IRDA, then they are to be treated as payments made towards professional charges as those persons are doing profession and will be governed by the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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