TaxTMI 
TaxTMI 
2011 (6) TMI 2
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....82,00,783/-. The Assessing Officer (AO) issued intimation under Section 143(1)(a) of the Income Tax Act (hereinafter referred to as "the Act") accepting the returned loss. Return of income was revised on 27.12.1999, declaring a loss of Rs. 4,26,50,098/-. The revised return was also processed under Section 143(1) of the Act, at the returned loss. During the instant assessment year, the appellant had incurred an expenditure of Rs. 52,70,636/- on account of commission paid to the Direct Selling Agents (DSA) for their services in sourcing hirers in the year in which the loan is disbursed and debited its Profit & Loss account by a sum of Rs. 48,38,636/- for the purpose of accounting was treated as deferred revenue expenditure. ....
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....he Tribunal") by the impugned order, however, has restored the matter to the file of AO for afresh adjudication of the disallowance made of Rs. 48,38,636/-, out of the total claim of the expenditure incurred of Rs. 52,70,636 on account of commission paid to the DSAs, to the file of the AO with certain directions. The Tribunal took into consideration the terms of the Agreement as per which commission was payable to the DSAs. The term regarding payment stipulates as under: "1. The company shall pay the DSA as per case brokerage and a farther brokerage on the volume of business generated which will be communicated to it from time to time against their making available to the company their expertise. The DSA will under no ci....
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....bunal further observed that the Agreement showed that the DSAs were to source the borrower, but the terms of Agreement did not reveal as to on which basis the brokerage is payable and was linked to what, or how the assessee would be liable to pay such brokerage. According to the Tribunal, therefore, there was no sufficient material to give a fining as to the allowability of entire brokerage in the year of payment itself. Moreso, when the assessee itself treats the expenses as to be amortized over period beyond the relevant financial year. With this discussion, the précise directions given to the AO are as under: "The Assessing Officer shall consider how the brokerage paid is worked out and is linked to what nature of income r....
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....ed by the Tribunal in the following manner: "4. It is not the function of the Tribunal to enter into the arena and make suppositions that are tantamount to the evidence that a party before it has failed to lead. Other than supposition, there is no material on record that suggest that a small scale or medium scale manufacturer of brake linings and clutch facings "would be interested in buying" the said rings or that they are marketable at all. As to the brittleness of the said rings, it was for the Revenue to demonstrate that the appellants" averment in this behalf was incorrect and not for the Tribunal to assess their brittleness for itself. Articles in question in an appeal are shown to the Tribunal to enable the Tribunal to compre....
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.... out what profits there be, the normal accountancy practice may be to allow as expense any sum in respect of liabilities which have accrued over the accounting period and to deduct such sums from profits. But the income-tax laws decided on not take every such allowance as legitimate for purposes of tax. A distinction is made between an actual liability in present and a liability de future which, for the time being, is only contingent. The former is deductible but not the latter. The case which illustrates this distinction is Peter Merchant Ltd. v. Stedeford. No doubt, that case was decided under the system of income-tax laws prevalent in England, but the distinction is real. What a prudent trader sets apart to meet a liability, not actually....