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Issues: (i) Whether the commission expenditure claimed by the assessee was allowable as business expenditure. (ii) Whether the deduction under section 54F was to be restricted to the residential portion of the new building.
Issue (i): Whether the commission expenditure claimed by the assessee was allowable as business expenditure.
Analysis: The assessee produced complete details of the commission agents, their PAN particulars, bills, candidate details, and proof of payment by account payee cheques with tax deduction at source. The business of manpower placement required discreet sourcing, and the Assessing Officer did not make adequate enquiry with the agents, the ultimate customers, or the tax records to disprove the claim. Similar commission payments had also been accepted in subsequent years.
Conclusion: The commission expenditure was allowable and the disallowance was unsustainable.
Issue (ii): Whether the deduction under section 54F was to be restricted to the residential portion of the new building.
Analysis: The assessee had invested capital gains in a building used partly for commercial purposes and partly for residential purposes. Section 54F is a beneficial provision and must be construed liberally. The factual materials showed residential use of the upper floors and no commercial activity in the premises, while the ground floor and common areas were appropriately treated differently for apportionment. The apportionment adopted by the first appellate authority was held to be reasonable.
Conclusion: The deduction under section 54F was rightly restricted to the residential portion, and the quantified relief was upheld.
Final Conclusion: The Revenue's appeal failed in entirety, and the relief granted by the first appellate authority was sustained.
Ratio Decidendi: Commission paid for business purposes, supported by documentary evidence and tax deduction at source, cannot be disallowed merely because third parties do not corroborate the assessee's case, and a beneficial deduction provision must be applied in a liberal and realistic manner to the residential component actually used for the qualifying purpose.
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