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2016 (10) TMI 888

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..... nst the order of the Commissioner of Income Tax(Appeals)-I Baroda, dated 02/01/2014 for the Assessment Year (AY) 2010-11. The Revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the Id. CIT(Appeals) erred in deleting the addition/disallowance of consultancy charges of ₹ 31,41,320/- paid to Jeevansuraksha Medicare Services Ltd. without appreciating the fact that that the expenditure was not incurred wholly and exclusively for the purpose of business of the assessee on the fact of assessee's case. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(Appeals) erred in deleting the addition ₹ 22,67,133/- made on account of disallowance of the claim of commission payable to associates without appreciating the fact that the assessee failed to prove that these expenditures were incurred wholly and exclusively for the purpose of business of the assessee. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(Appeals) erred in deleting the addition of ₹ 1,31,860/- made on account of disallowance of claim of good health expenses without appreciating the f .....

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..... details of the payables were also not verifiable. As per the AO, therefore, the commission payable to associates being unverifiable liability amounting to ₹ 22,36,133/- was added to the returned income. The AO in his remand report has further stated that the appellant has now produced the copies of letters giving advice to its Banks and detailed notes of transferring fund to the members during the subsequent financial year. As per the AO, as per the submission of bank remittance details, it is revealed that an amount of ₹ 16,20,680 was paid during the subsequent year and ₹ 6,46,453/- was still unpaid. Thus, as per the A.O. an amount of ₹ 6,46,453/- is still commission payable in the subsequent year. The AO in his report has mentioned that the veracity of payment was not the basis of addition. As per the AO, the disallowance/addition was made due to unverifiable nature of the payments (here commission payable) being made. Thus, as per the AO now the evidence of subsequent payment still do not qualify the commission payable amount as a payment made for the business purpose. It is further stated by the AO that during the course of assessment proceedings, the a .....

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..... ing the year amounting to ₹ 3,00,52,584/-, a commission of ₹ 22,67,133/- was payable at the end of the year. As per the ARs the assessee company has over 5000 to 6000 agents to whom it pays commission varying in amounts. As per the ARs the number of agents to whom commission of ₹ 22,67,133/- is payable is more than 4000 person. As per the ARs to produce all such agents and their confirmations is not possible. As per the ARs however the appellant had produced names of all the associates along with their addresses/PAN and details of commission payable to them at the time of assessment proceedings. As per the ARs since the same had not been verified by the Ld. AO at the time of assessment proceedings, the appellant company had produced the same along with the copies of confirmations, address and PAN Card of about 18 persons along with which was sent to the AO for remand report. As per the AR copy of bank statement of the appellant company for two months i.e. April and May 2010, which shows commission payments made to these members along with details of payments of outstanding commission made to these members in the subsequent financial year were also produced before .....

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..... ments of commissions were not genuine and the same were not for the business purpose, the addition in such cases are not justifiable. However, without any proper findings, claim of commission cannot be disallowed. Considering all these facts it is held that the AO is not correct in making disallowance of commission payments of ₹ 22,67,133/- and therefore the same is deleted. Thus the ground of appeal no. 3 of the appellant is allowed. 7.8 The ground of appeal no. 4 of the appellant is that the Ld. Assessing Officer erred in disallowing good health expenses amounting to ₹ 1,31,860/-. In this regard the AO in his assessment order has mentioned that this amount of ₹ 1,31,860/- pertains to payment of ₹ 81,860/- and ₹ 50,000/- made against certain claims. As per the AO, the payment of ₹ 81,860/- is claimed to have been paid to Mr. Dushyant Fulabhai Patel. As per the AO, the other payment of ₹ 50,000/- is ostensibly been paid for some awareness programme related with health insurance as mention by the AR of the appellant. However both these payments could not be verified by the AR of the appellant. As per the AO, the business purpose achie .....

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..... g claim. As per the ARs, there are also disputes relating to premium, improper documents, etc. with such insurance companies. As per the ARs, in order to give effect of such debit by them the appellant company had debited good health expenses and credited Oriental Insurance Co. Ltd. This is one type of damages and therefore is rightly charged as expense in the Profit and Loss account. As per the ARs, both the above transactions of ₹ 81,860/- and ₹ 50,000/- are business expenses of the appellant company. Since they are related to medical expenses they are debited in the account head of good health expenses . As per the ARs, the expenses are incidental and ancillary to the appellant company's business and are allowable under the Income Tax Act, 961. These submissions of the ARs are found to be tenable. As per Ld.ARs, the Ld. Assessing Officer has not appreciated the nature of transactions and blindly disallowed the same. As per the ARs in spite of submitting details of transaction by way of ledger account and voucher the Ld. Officer has disallowed saying the appellant company has not proper explanation. These submissions of ARs of the appellant are to be tenable. Thi .....

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