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The ACIT Circle-1 (2) Baroda Versus M/s. JMSL Websolution Pvt Ltd.

Disallowance of consultancy charges - whether the expenditure was not incurred wholly and exclusively for the purpose of business of the assessee ? - Held that:- We find that in the instant case, the AO has agreed that submissions were duly made and all payments cannot be doubted. In our considered opinion, it is not the duty of the Department to hold that where the expenditure is to be made. It is for the business-man to decide where the expenditure is to be made for smooth functioning of the b .....

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MEMBER : This appeal by the Revenue is directed against 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 exp .....

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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 fact 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 date of hearing, none appeared on behalf of respondentassessee nor any application for adjournment of .....

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sessee electronically filed its return of income declaring total income at ₹ 30,08,606/- on 30/09/2009. The case was selected through CASS for scrutiny and thereafter assessment was framed u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 17/01/2013 and the total income was determined at ₹ 29,24,150/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 02/ .....

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AO u/s.43B of the IT Act is hereby deleted. Thus the ground of appeal no.2 of the appellant is allowed. 7.6 The ground no. 3 of the appeal of the appellant is that the Ld. Assessing Officer erred in disallowing commission payable to associates amounting to ₹ 22,67,133/-. With regard to this ground of appeal, the AO in the assessment order has mentioned that the commission payable to associates of ₹ 22, 67,133/- was asked to be justified vide the order sheet entry. As per the AO, the .....

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nsferring 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/additi .....

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the AR of the appellant could not substantiate the payables to associates as actually paid in the subsequent year. As per the AO, moreover the details of the payables were also not verifiable. As per the AO, the appellant could not prove the business purpose achieved against such liability created. As per the AO, therefore, the basis of addition was on two counts, i.e. the commission payable of ₹ 22,67,275/- was unverifiable as to who all were the persons to whom such payment was due to be .....

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paid. Another reason for making the payment is that whether such payment was made for the business purpose of the appellant. But these two grounds on which addition has been made by the AO are not found to be sustainable. It is not understandable as to why the commission of ₹ 22,67,275/- as made by the appellant was not verifiable. It appears that the AO has either during the course of assessment proceedings or at the time of remand proceedings have not made any effort to verify these paym .....

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this share in the contribution is paid in the form of commission to the respective agents and IDS is also deducted wherever applicable from the payments made to them. As per the ARs out of total commission expenses incurred during 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 w .....

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ng 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 the AO at the time of remand report. The AO has gone through the details .....

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make payments and also confirms the fact that the payments are genuine. As per the ARs they had also requested the Ld. AO to call for confirmations u/s 133 (6) to cross verify the outstanding with the respective third parties. As per the ARs however he has not bothered to do so. As per the ARs thus, this Itself shows the inadequacy and unwillingness on part of the Ld. AO to go the distance and take efforts to verify the transactions in detail. As per the ARs during the assessment proceedings he .....

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ARs are found to be tenable. The fact is that the details were available before the AO and he could have made verification on random basis in respect of some of the parties. Thus the ground of the AO that the payments of ₹ 22,67,133/- are not verifiable cannot be accepted. The veracity of the payment has not been doubted. If the payments are made in subsequent years and some of the payments are shown as outstanding, the same cannot be the basis for making the addition. Making payments of .....

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laim 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 a .....

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siness purpose achieved and the justification of such expenses could not be proved during the course of the assessment proceedings. On the other hand, the ARs in their submission as filed have submitted that the appellant company is engaged in the business of providing medical related services to members who subscribe to the membership of company. As per the ARs the company appoints associates/ agents who in turn recruit down line associates (sub-agents) and thereby each associate gets a share i .....

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expenses of its members. As per the ARs, such a situation does not happen every time. As per the ARs since the appellant company Quarts memberships from various members the benefit it gives in return to As Members is in the form of group insurance policies taken for the members. As per the ARs the premium is borne by the appellant company and it is responsible to pass on the benefits of the insurance policy to its members. As per the ARs, so when some member becomes sick and a claim is filed, un .....

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y pertaining to Oriental Insurance Co. Ltd. of ₹ 50,000/- was also on account of some dispute with them as a result of which Oriental Insurance Co. Ltd. had debited the appellant company's account in its books. As per the ARs, since the appellant company takes insurance policies from Oriental Insurance and files insurance claims for and on behalf of it members, sometime disputes arise with them in processing claim. As per the ARs, there are also disputes relating to premium, improper d .....

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