TMI Blog2019 (11) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission income has already been included in assessee s income as miscellaneous income? In ITA No. 3205/Mum/2019 (i) On the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in deleting the addition of ₹ 3,09,50,705/- on account of commission income stating that the said commission income has already been included in assessee s income as miscellaneous income. 3. Briefly stated facts are that the AO while completing the assessment under section 143(3) of the Act completed the assessment under section 143(3) of the Act and computed commission of bogus purchases contending that the assessee has earned commission of ₹ 97,98,271/- on these transactions, which is not reported in the book of accounts. Therefore, this commission of ₹ 97,98,271/- being aggregate of 0.30% of total sale and purchase (Bogus) was added. Again, while completing the assessment under section 153C read with section 143(3) of the Act, the commission income was reassessed at ₹ 4,07,48,976/- being 1% of the aggregate new investment made and total sale made by the assessee company during the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4.2 I find that the rate of 1% adopted by the AO is reasonable, considering that the commission made as reflected in the seized documents in the case of Shri Shrish Shah is in the rate of 2%. I am also inclined to agree with the AO that the commission income should be considered in respect of the sales and the new investment during the year, as done in the order under section 153C of the Act and not in respect of the purchase. I find that merit in the submission of the appellant that so far as the sale is concerned, the rate 1% should be considered in respect of the sales of ₹ 56,47,72,218/- made to outside parties, since no such commission would be received on making sales to group/ related concern like, mobile Telecommunication. Further, I find that the appellant has shown miseallenous income of ₹ 40,718,363/- which include foreign exchange gains of ₹ 4,086,360/-. If the foreign exchange gains is excluded, the miscealleneous income by way of interest received, write off of sundry balances, sale of shares, etc. would be ₹ 366,32,003/-. These incomes have been received or booked in relation to the business of giving by way of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome derived there from is also not genuine and represented the commission income accrued to the assessee. We also noted that 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 at ₹ 3,10,06,562/- being 1% of the aggregate of new investments and sales to outside parties and held that since the assessee company has already offered income of ₹ 3,66,32,003/-, 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). Both the appeals of Revenue are dismissed on this issue. 7. Coming to the assessee s appeal in ITA No. 5207/Mum/2017, the learned Counsel for the assessee stated that he is not interested in prosecuting the following ground No. 1 to 4: - 1. Under the facts and circumstances of the case, the appellate order passed by the ld. CIT (A) is unreasonable being against the principles of natural justice and against the provisions of IT Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred and receipt of ₹ 263,36,743/- has been shown against this head. I find that the appellant has shown profit of 0.375% which is very low and points of inflation of expenses. Therefore, some disallowance out of such expenses is found to be justified. However, I find that the disallowance @30% is very high and the same is restricted to 10% of such expenses, i.e. to ₹ 26,23,800/-. Accordingly, the balance addition of ₹ 42,57,602/- is deleted. Aggrieved, against the restriction at 10% assessee came in appeal before Tribunal. 12. We have also heard rival contentions and gone through the facts and circumstances of the case. 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. 13. The next issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing expenses being R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td Vs. CIT, the Hon ble Apex court has held as under: We do not consider it necessary to examine all the decisions in extenso because we are of the opinion that the fee paid to the Registrar for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit-making, it still retains the character of a capital expenditure since the expenditure was directly related to the expansion of the capital base of the company. We are, therefore, of the opinion that the view taken by the different High Courts in favour of the revenue in this behalf is the preferable view as compared to the view based on the decision of the Madras High Court in Kisenchand Chellaram (India) (P.) Ltd.'s case (supra) . We, therefore, answer the question raised for our determination in the affirmative, i.e., in favour of the revenue and against the assessee. The above said decision has been followed in the case of Brooke Bond India Ltd. vs. CIT 91 TAxmann 26 (SC) and it has been held that, the expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of share capital made was as under: - Closing share capital 1070123875 Opening share capital -124142875 Share premium 1560000000 Share premium 1273876500 Total 3778857500 On going the details of closing share capital, it is seen that the share capital includes bonus shares of ₹ 69,00,00,000/-. The share capital on account of bonus share cannot be treated as unexplained credit under section 68 as the same is out of reserve and surplus. Therefore, the addition of ₹ 69,00,00,000/- under section 68 of the Income-tax Act 1961 is mistake apparent from the records and rectified under section 154 of the Income-tax Act 1961 as under: - Total income as per order u/s 143(3) r.w.s 153C dated 22nd March 2016 351,47,83,330 L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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