TMI Blog2021 (3) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... ocumentary evidences have not been doubted by the A.O, therefore, assessee has been able to prove that the impugned amount have been incurred wholly and exclusively for the purpose of business of assessee. A.O. did not bring any evidence on record to dispute the correctness of the documentary evidences filed by the assessee on record. The A.O. merely following the information received from the search of Shri Praveen Agarwal, disbelieved the explanation of assessee, but, such fact cannot be read in evidence against the assessee. The details of ledger account show that assessee has regular business with M/s. Taral Vincom Pvt. Ltd., which is supported by the activities conducted by them. The bills issued by assessee and copy of bills issued by M/s. Taral Vincom Pvt. Ltd., show complete details as to for which property the transactions have been conducted by the sub-brokerage, for which commission have been paid to M/s. Taral Vincom Pvt. Ltd. The documentary evidences on record clearly suggest that assessee entered into the genuine business activities with the sub-broker and sub-broker rendered services for the business activity of the assessee. In the Group Case the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the real estate deals. The assessee also filed supporting documents in support of the contention. The assessee further submitted before A.O. that the above expenditure is an allowable deduction under section 37 of the I.T. Act, 1961 and relied upon Judgments of the Hon ble Supreme Court in the cases of CIT vs., India Molasses Co. P. Ltd., [1970] 78 ITR 474 (SC); J.K. Cotton Mfrs. Ltd., vs., CIT [1975] 101 ITR 221 (SC) and CIT vs., Panipat Woollen General Mills Co. Ltd., [1976] 103 ITR 66 (SC). The A.O, however, did not accept the contention of assessee in the light of information emanating from the search in the case of Shri Praveen Agarwal for booking the expenditure. The A.O. accordingly disallowed the impugned amount of ₹ 1,58,91,312/-. 3.1. The assessee challenged the addition before the Ld. CIT(A). The detailed written submissions of the assessee is reproduced in the appellate order in which the assessee briefly explained that assessee is in the business of real estate. The impugned amount was paid as sub-commission / sub-brokerage which was laid out expended wholly and exclusively for the purpose of business. Shri Praveen Agarwal did not mention about issue of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al estate in which sub-brokers and brokers help in finalizing sale/purchase of real estate in lieu of certain percentage of commission/ brokerage which is the standard practice in this line of business. During assessment proceedings the assessee had filed details of the commission on the five transactions amounting in total to ₹ 1,58,91,312 (₹ 76,00,000 + ₹ 34,07,122 + ₹ 31,03,300 + ₹ 15,48,690 + ₹ 2,32,200 = ₹ 1,58,91,312). The provisions of Section 37(1) are as under: 37.General - (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and Gains of business or profession . A plain reading of section 37(1) reveals that payment of commission / brokerage / sub-brokerage is an allowable expenditure u/s 37(1) of the Act. It has not been disputed by the assessing officer that this payment to M/s Taral Vincom Pvt. Ltd. has been made through banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention anything in the assessment order as to how the statement of Shri Praveen Agarwal was incriminating in nature against the assessee. The assessee submitted before the Ld. CIT(A) that in the Group case of M/s. Reach Promoters Pvt. Ltd., an identical issue have been considered by the Ld. CIT(A) in respect of the same broker M/s. Taral Vincom Pvt. Ltd., in the light of statement of Shri Praveen Agarwal and addition have been deleted. It would, therefore, show that Shri Praveen Agarwal did not make any allegation against the assessee of taking any bogus commission / brokerage in the matter. The statement of Shri Praveen Agarwal have been recorded at the back of the assessee and was never confronted to the assessee for explanation or cross-examination on behalf of the assessee. No such fact is discernible from the assessment order. Even this point was raised before the Ld. CIT(A) and the Ld. CIT(A) in the case of M/s. Reach Promoters Pvt. Ltd., Group Company has also considered this issue that no opportunity was given to cross-examine the statement of Shri Praveen Agarwal, therefore, such statement cannot be read in evidence against the assessee. We rely upon the Judgments of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Pvt. Ltd. These documents show that assessee has substantial income from brokerage/commission and other income and for earning the same, assessee shall have to pay commission and sub-brokerage to others, which in this case has been paid to M/s. Taral Vincom Pvt. Ltd., for business purposes. The details of ledger account show that assessee has regular business with M/s. Taral Vincom Pvt. Ltd., which is supported by the activities conducted by them. The bills issued by assessee and copy of bills issued by M/s. Taral Vincom Pvt. Ltd., show complete details as to for which property the transactions have been conducted by the sub-brokerage, for which commission have been paid to M/s. Taral Vincom Pvt. Ltd. The documentary evidences on record clearly suggest that assessee entered into the genuine business activities with the sub-broker and sub-broker rendered services for the business activity of the assessee. In the Group Case the Ld. CIT(A) has already deleted the similar addition finding the commission payment made to the same sub-broker as genuine. Considering the totality of the facts and circumstances of the case noted above and in the absence of any rebuttal from the side of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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