TMI Blog2011 (5) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... ket - CIT(A) further observed that there is no substantial decline in the net margin of the assessee - Its turn over has been increased from Rs. 1,65,28,203 to Rs. 3,36,78,330 - Thus the turn over has become almost double - Decided in favour of assesee. Advertisment Expenditure - According to the assessee, M/s Surender Properties is in the existence of the real estate business even before the assessee came into existence - Held that:- The name of Surender Mukhija in a way enhanced the business of assessee - However, there is no evidence available on record to this effect - The assessee has placed on record copy of the assessment order passed in the case of Shri Surender Mukhija from which it is found that Shri Surender Mukhija had incurred a sum of Rs. 20,39,479 towards advertisement and the name of assessee has been appearing in his advertisement - Thus in a way, assessee has been fairly compensated, the expenses incurred by both the concerns mutually give benefit to each other mutually - Hence, it cannot be termed that assessee has extended undue benefit to third concern by giving its name in the advertisement of the assessee - Otherwise expenses have not been doubted by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. He observed that assessee has received the commission. The nature of receipt is commission. It has parted with that receipt. Hence, it ought to have deducted the tax. Accordingly, Assessing Officer has disallowed the claim of assessee made under the head "marketing expenses including incentives and discounts." 3. Dissatisfied with the Assessing Officer, assessee carried the matter in appeal before ld. CIT(A). It pointed out that the payments made by the assessee are not in the shape of commission rather it is the discount to the ultimate purchaser of the flat/house. The assessee has apprised the definition of commission/brokerage provided in the explanation appended to section 194H of the Act. Ld. First Appellate Authority has reproduced the written submission of the assessee and thereafter deleted the disallowance. The brief finding recorded by the ld. CIT(A) read as under : "I have gone through the submission of the assessee and I find that discount had been given by the appellant to persons who had booked the flat/building through the appellant and the commission which the assessee received from the builder, it passed on a part of such commission to the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n their cost price for the purchase of flat . 5. We have duly considered the rival contention and gone through the record carefully. Section 194H has a direct bearing on the controversy. Therefore, it is salutary upon us to take note of the section which read as under : "194H. Commission or brokerage.--Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent : Provided that no deduction shall be made under this section in a case where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year to the account of, or to, the payee, does not exceed two thousand five hundred rupees : Provided further that an individual or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller. The ld. First Appellate Authority has appreciated the controversy in right perspective and we do not see any reason to interfere in his order. Ground No. 2 7. In this ground of appeal, grievance of the revenue is that ld. CIT(A) has erred in deleting the disallowance of Rs. 25 lakhs out of commission expenses of Rs. 43,99,257. 8. With the assistance of ld. Representative, we have gone through the record carefully. It reveals from the record that assessee has paid a commission of Rs. 43,99,257 to various concerns and individuals. The Assessing Officer has noticed the details of 8 individuals/concerns in the tabular form at page 5 who are covered under section 40A(2)(b) of the Income-tax Act being related persons and to whom commission has been paid. In the opinion of Assessing Officer, the commission was paid excessively to these persons and they have not rendered the services for the assessee. On appeal, assessee has submitted detailed written submissions in respect of each individual to whom commission has been paid. Ld. First Appellate Authority has reproduced the submissions of the assessee. Ld. CIT(A) after appreciating the facts and circumstances deleted the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, we are of the opinion that in order to claim any expenditure not being expenses described in sections 30 to 36 and not being in the nature of capital expense or personal expense laid out and has been wholly and exclusively for the purpose of business, one's claim has to be examined under the residuary provision of section 37. The expression wholly employed in section 37 referred to the quantum of expenditure while the word exclusively referred to the motive, objective and purpose of expenditure. In the present case, the motive and objective of the expenditure is to take help of these persons for booking of the flats/plots at pre launching of project commenced by the builder. The objection of the Assessing Officer is of two folds : (i) It is excessive hence deserves to be disallowed under section 40A(2b) and (ii) It is not genuine. 11. As far as genuineness is concerned, assessee has placed on record evidence exhibiting the services rendered by these persons. It has also placed on record, details of each individual for demonstrating the facts that these persons were engaged in the business of consultancy in real estate. For the purpose of section 42A(2b), the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the order of Assessing Officer. 15. We have considered the rival contention and gone through the record carefully. According to the assessee, M/s Surender Properties is in the existence of the real estate business even before the assessee came into existence. The name of Surender Mukhija in a way enhanced the business of assessee. However, there is no evidence available on record to this effect. The assessee has placed on record copy of the assessment order passed in the case of Shri Surender Mukhija. From perusal of the assessment order, we find that Shri Surender Mukhija had incurred a sum of Rs. 20,39,479 towards advertisement and the name of assessee has been appearing in his advertisement. Thus in a way, assessee has been fairly compensated, the expenses incurred by both the concerns mutually give benefit to each other mutually. Hence, it cannot be termed that assessee has extended undue benefit to third concern by giving its name in the advertisement of the assessee. Otherwise expenses have not been doubted by the Assessing Officer. Considering all these aspects, we are of the view the expenses were incurred exclusively for the business purpose and no disallowance deserv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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