TMI Blog2016 (7) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be sustained. This ground of the revenue is rejected. - I.TA No. 5743 /Mum/2014, 6019 /Mum/2014 - - - Dated:- 27-7-2016 - Shri Rajendra, Accountant Member And Shri C.N. Prasad, Judicial Member Assessee by: Shri F.V. Irani Shri Zareer N. Mehta Revenue by: Shri Manjunatha Swamy ORDER C.N. Prasad, These two appeals are filed by the assessee and the Revenue against the order of the Ld. CIT(A)-8, Mumbai dated 14.7.2014 pertaining to assessment year 2010-11. 2. The assessee has raised following grounds of appeal: 1. The Ld. CIT(A) erred in restricting the allowance of sub-brokerage expenditure incurred to 50% of the brokerage earned. 2. The Ld. CIT(A) erred in ho0lding that the subbrokerage expenditure incurred and claimed by the appellant was excessive and unreasonable within the meaning of Sec. 40A(2) of the Act. 3. The Ld. CIT(A) failed to appreciate the evidence led by the appellant in its proper perspective. 4. Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the Assessing Officer be directed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 194H which is a specific provision for commission and brokerage but not under the provisions of Sec. 194J of the Act. Further it was submitted that the provisions of Section 194H are not attracted for the sub-brokerage paid on dealing with securities in view of the proviso which exempts such brokerage. However, the AO rejecting the contentions and on securities treated the said amount of sub-brokerage paid by the assessee as fees for technical services within the provisions of Sec. 194J of the Act. The Ld. CIT(A) accepted the contention of the assessee that the payment made by the assessee would fall under the provisions of Sec. 194H and since the securities are exempt, provisions of Sec. 194H have no application. However, he invoked the provisions of Sec. 40A(2) of the Act and restricted the disallowance to 50% of brokerage. According to him there is excess payment of sub-brokerage by the assessee. He held that it is for the assessee to prove beyond all doubt that the payment made constituted the fair market value of the services received. As far as the findings of the Ld. CIT(A) that the payments are attracted the provisions of Sec. 194H is concerned, we completely agree with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention to avoid tax. g) That even as per databases, the profitability of the appellant, even after payment of sub-brokerage, is better than the comparables. 7.4. None of these submissions of the assessee have been rebutted by the lower authorities. Thus, the observation of the Ld. CIT(A) that it is for the appellant to prove beyond all doubt that the payment made constituted the fair market value of the services received is not justified since assessee has given instances where the sub-brokerage was paid at 70% of the commission received. Further a list of parties were submitted to show that the sub-brokerage paid was in the ratio of 60:40 and 80:20 depending on the market conditions. The lower authorities have not made any enquiries to disprove the submissions of the assessee. 8. In the case of Orchard Advertising (P) Ltd. (supra), the Mumbai Bench of the Tribunal held as under: We see merits in the plea of the assessee. The impugned disallowance under section 40A(2)(b) viz provides that where the assessee incurs any expenditure in respect of which payment has been made to specified person, and the Assessing Officer is of opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For this reason alone, the disallowance under section 40A(2) is inherently unsustainable in law on the facts of this case. 9. In the case of Aradhana Beverages Foods Co. (P) Ltd VS DCIT 51 SOT 426, the Delhi Bench held as under: The opening words of Section 40A(1) indicate that the provisions of this Section shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act relating to the computation of income under the head profits and gains of business or profession . In other words, Section 40A is an overriding provision which operates inspite of anything to the contrary contained in any other provisions of the Act relating to the computation of income under the had profits and gains of business or profession. Sub-Section 2(a) of Section 40A provides that where the assessee incurs any expenditure in respect of which payment has been made or is to be made to the persons specified in that Section and the AO is of opinion that such expenditure is excessive or unreasonable having regard to the market value of the goods, services or facilities for which the payment is made or the legitimate needs of business or profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble jurisdictional Bombay High Court in the case of CIT Vs. Indo Saudi Services (Travel) (P) Ltd (2009)(310 ITR 306), wherein the Hon ble Bombay High Court referred to the Circular issued by CBDT with regard to sec. 40A(2)(a) as under:- Under the CBDT Circular No. 6-P, dated 6th July, 1968 it is stated that no disallowance is to be made under section 40A(2) in respect of payments made to relatives and sister concerns where there is no attempt to evade tax. In the case before the Bombay High Court, the revenue was not in a position to show as to how the assessee therein evaded payment of tax by alleged payment made to its sister concern, since the sister concern was also paying tax at higher rate and hence the disallowance made u/s 40A(2)(a) was deleted. We further notice that the Hon ble Bombay High Court has expressed identical view in the case of V.S. Dempo Co. (P) Ltd (336 ITR 209) also. The Hon ble Punjab Haryana High Court has also expressed similar view in the case of CIT Vs. Siya Ram Garg (HUF) (2011)(237 CTR 321) . Respectfully following the said order, we hold that the provisions of Sec. 194H are attracted to the payments ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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