TMI Blog2022 (9) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of assessee's claim of exceptional losses on account of certain trades - HELD THAT:- We are unable to persuade ourselves to accept to this argument of the AR in view of the fact that the clients had incurred losses due to neglect of ABML. Hence it is the goodwill of ABML that would be ruined and not the assessee. Hence there is no question of retention of goodwill for which this loss was absorbed by the assessee. Even assuming if the goodwill of the assessee is to be retained by keeping its clients in good humor by absorbing their losses, the assessee should have recovered the said loss from ABML as admittedly the loss had been incurred only due to neglect of ABML and not the assessee herein. In any event, there is absolutely no justification for the assessee to claim the said loss in its books as deduction. Hence we deem it fit and appropriate to address the entire issue on the first principle basis without placing reliance on any decisions. The ratio laid down in each of the decision is to be seen from the facts prevailing in those cases and could be made applicable only for those facts. Hence the various decisions relied upon by the ld. AR on the aspect of commercial exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue is allowed for statistical purposes. TDS u/s 194J - Disallowance of provision made for expenses u/s.40(a)(ia) - HELD THAT:- We find that the Tribunal had stated that the said expenses are cost to cost payments falling under the ambit of reimbursement. In that context, it was decided that TDS would not be applicable thereon. Whereas for the year under consideration, we find that assessee had never taken a plea that it is reimbursement of expenses. Even in the statement of facts filed before the CIT(A), the assessee had only stated that these are provisions for expenses made on best estimate basis and tax would be deducted at the time of making actual payment thereon. Hence, we hold that reliance placed on the decision of this Tribunal in assessee s own case would not come to the rescue of the assessee. However, in the interest of justice, we hold that assessee would be liable for deduction of this expenditure in the year in which the tax deducted at source had been duly remitted to the account of the Central Government. Accordingly, the ground raised in the cross objection of the assessee is partly allowed. - ITA No.4256/Mum/2016 And CO No.12/Mum/2018 (Arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Respectfully following the said Tribunal order, the ground No.1 raised by the Revenue is dismissed. 3. The ground No.2 3 raised by the Revenue are challenging the action of the ld. CIT(A) in deleting the disallowance of assessee s claim of exceptional losses on account of certain trades of Rs.95,68,91,785/-. 3.1. The brief facts of this case are that the assessee company was acting as authorised person and has entered into business partner agreement with ABML on 23/08/2010 which interalia required the assessee bank to make customers or essential customers aware of the products and the services of ABML from time to time and sharing details of all such customers who have evinced interest in availing such products and services. Under the agreement, the assessee company was entitled to a share of 70% of the brokerage revenue earned by ABML from the customers referred by the assessee. For carrying out such business, the assessee company was appointed as authorised person of ABML in terms of SEBI Circular No.MISRD/DR1/CIR-16/09 dated 06/11/2009. Subsequently, and approval from National Stock Exchange of India Ltd., was obtained on 20/08/2010 and later from BSE and MCX-SX. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income which was sought to be disallowed by the ld. AO as assessee had got no linkage with the said transaction except referring its customers to make investments in the options maxima scheme offered by ABML. For the referral made by the assessee, the assessee had earned brokerage income. The ld. AO observed that there is absolutely no risk that could be fastened on the assessee in this transaction as the risk disclosure document for making investment in options maxima scheme offered by ABML has been entered only between the clients and ABML. Hence, the clients were very much aware about the possible risk that would arise in this investment transaction of options maxima scheme offered by ABML. Hence, there is no point in assessee absorbing the said loss in the garb of maintaining the goodwill of the clients. If at all the clients are to be retained by the Aditya Birla group, then ABML should have come forward to absorb loss on behalf of the clients. The ld. AO observed that merely by way of business partner agreement dated 23/08/2010 entered into between ABML and assessee would not make the assessee legally liable to take over the losses of some other company for a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonging to ABML, the losses incurred thereon were absorbed by ABML. It was submitted that the clients were familiar with the Relationship Managers of the assessee company and not with ABML. Considering the outcome of the Options Maxima Scheme , the clients would not have conducted further transactions with their Relationship Manager which would in turn affect the business of the assessee company. Hence, the assessee was compelled to bear the losses of the clients in order to maintain its goodwill and reputation with the clients. Accordingly, the conscious decision was taken in the Board Meeting dated 27/10/2010 and 24/01/2011 wherein the decision to absorb losses of the clients by the assessee company and provision for such loss to be made in the books of the assessee company, were taken. 3.5. The ld. CIT(A) in para 6.3.25 had categorically stated that the business partner agreement dated 23/08/2010 entered into between ABML and assessee is more of an agency agreement. The ld. CIT(A) on placing reliance on the business partner agreement dated 23/08/2010 entered into between ABML and assessee especially Clause 2.1A thereon, observed that assessee would be contractually liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for ABML to bear the said loss either after recovering the value of collateral securities or without enforcing the securities, as per its desire. But in no case, this loss could be shifted on the assessee herein, which has got absolutely no role to play except introducing some of its clients to ABML to make investment in Options Maxima Scheme. Even though the clients of assessee were introduced to ABML for making investment in Options Maxima Scheme developed by ABML, the risk disclosure document has been signed with the concerned client by ABML wherein the risk associated with the capital market is clearly informed to the clients. At this juncture, it would be relevant to address the relevant clause number 2.1A of the Business Partner Agreement dated 23.08.2010 which has been heavily relied upon by the ld. AR to buttress his argument that the loss incurred by clients is to be absorbed by the assessee. For the sake of convenience, the said clause 2.1A of the Business Partner Agreement dated 23.08.2010 is reproduced below:- The Business Partner shall be solely liable for all (i) losses , defaults, amounts due and payable by clients serviced by the Business Partner , (ii) penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horoughly misplaced and devoid of merits and totally against human probabilities. It is trite law that the substance of the transaction is to be recognized than its form. Hence the reliance placed on Clause 2.1A of the Business Partner Agreement entered into between ABML and assessee would not come to the rescue of the assessee. 3.9. The ld.AR before us vehemently argued that the clients sourced by assessee to ABML were part of large High Net Worth Individual (HNI) customer base and that their continued association with the assessee would be critical for the business growth of the assessee including future revenue generation. He argued that considering the long term business relationship the assessee had with these clients and as part of the comprehensive investment advisory proposition and an overall strategy to retain these clients since critical for the future business potential as well as goodwill, a decision was taken to take over the debit balances of these clients and transfer the amount to ABML directly. The payment so made was claimed as loss by the assessee herein. We are unable to persuade ourselves to accept to this argument of the ld. AR in view of the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are allowed. 4. The ground No.4 raised by the Revenue is challenging the action of the ld. CIT(A) in deleting the disallowance made on account of assessee s claim of Rs.1,63,27,011/- on account of loss arising out of irregularities committed by certain employees. 4.1. We have heard the rival submissions and perused the materials available on record. The assessee had claimed loss of Rs 1,63,27,011/- on account of embezzlement made by its branch employee as a loss incurred in the regular course of business. The ld. AO had disallowed the same on the ground that no details were furnished by the assessee during the course of assessment proceedings. Before the ld. CIT(A), the assessee pleaded that no details regarding this embezzlement were called for by the ld. AO and hence no details were filed. However, due disclosure of the said loss has been made in the accounts regarding the same and also in the notes to computation of income filed during the course of assessment proceedings. We find that the assessee had duly furnished the details of embezzlement loss before the ld. CIT(A) which is enclosed in page 145 of the paper book filed before us. The facts relating to this issue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the involvement of branch employee in such irregularity and who were neither attending to calls of the Clients nor were meeting with them and thus it created suspicion in the assessee's head office at Mumbal. Further, with no loss of time, in the beginning of September 2010 the assessee decided to take some corrective measures realizing that the losses were in the manageable limits. vi. However, the losses of the Clients with Open Positions piled up to Rs. 1.86 Crs. Pursuant to which, the clients were approached to absorb the losses, however, by such time the news spread through media by the clients of option maxima that Birla group had made good the client's losses. In this regard, some of the customer accepted the losses to the tune of 23 lacs, and signed the SOA with the commitment of reversal of brokerage late payment charges by the assessee while others did not absorb the losses aggregating to Rs. 1.63 Cr (inclusive of brokerage + late payment charges). It was thus, to ensure continuity of business and to avoid any contagious effect to retain existing clients and ability to acquire new clients, the assessee decided to write off the entire amount of 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting to Rs.59,815/- u/s.40(a)(ia) of the Act. 8.1. We have heard rival submissions and perused the materials available on record. We find that the ld. AO in para 3.1 of his order had noted that assessee had created provision for call centre expenses payable to M/s Tele Access e-Services Pvt. Ltd., amounting to Rs. 59,815/-. This expenditure provision in the opinion of the ld. AO was liable for deduction of tax at source @10% in terms of Section 194J of the Act. Since, tax deduction at source was not complied with by the assessee, the ld. AO proceeded to disallow the same u/s.40(a)(ia) of the Act. The assessee always pleaded that it had made provision only in respect of the amount for which invoices / debit notes / claims that were not received and provision was made on a best estimate basis. It was argued that merely because provision was made at the end of the year, the same does not automatically trigger the liability to deduct tax at source. It was further submitted that due tax deduction has been made at the time of making payment of the aforesaid expenses and it was also pointed out that payment has been made after the due date of filing of return of income for A.Y.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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