TaxTMI 
TaxTMI 
2011 (8) TMI 259
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....bad ought to have upheld the order of the AO. [6] It is, therefore, prayed that the order of the ld. Commissioner of Income-tax (A)-XIV, Ahmedabad may be set aside and that of the AO be restored." 2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return declaring income of Rs.16,31,680/-, filed on 28-12-2006 by the assessee, an investment broker, after being processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as the "Act"], was selected for scrutiny with the service of a notice u/s 143(2) of the Act on 11.10.2007.During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee reflected income of Rs.42,92,410/- on account of commission/brokerage income and claimed deduct ion of Rs.18,26,800/- towards commission/brokerage paid by it. To a query by the AO, seeking details of brokers, copies of agreement executed, nature of services received and justification for the payment, the assessee replied that there was no such agreement with the brokers and the brokerage was paid for introduction of clients. However, the AO did not accept the submissions of the assess....
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....the A.O., the A.O. never confronted the appellant with his proposed action to disallow the entire brokerage and made an addition even without issuing a show cause notice. In view of these facts, I am of the view that the disallowance made in respect of commission/brokerage is not justified and the same is directed to be deleted." 4. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 5. We have heard both the parties and gone through the facts of the case. Though the ld. DR contended before us that the assessee did not furnish any evidence of services rendered by the recipients of the brokerage, he did not dispute the fact that similar payment of brokerage to shri Nimesh Kenia and Shri Rakesh Mehta had been allowed by the AO himself in the preceding assessment year 2005-06. It is noticed that the deduction for payment to other brokers mentioned on page 10 of the paper book has been allowed in the AY 2004-05 and 2005-06. In the instant case, the ld. CIT(A) observed that the payment of broker....
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....time. Further, it is seen that the benefit of Keyman Insurance is available to the M.D. of the appellant company until death and hence, the disallowance of premium on the ground that it only covers one year is not justified and hence the same is directed to be deleted." 8. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 9. We have heard both the parties and gone through the facts of the case. The issue before us is as to whether the deduction for premium paid under the keyman insurance policy is to be allowed on prorata basis for the period falling in the previous year relevant to the assessment year under consideration under the mercantile method of accounting followed by the assessee. Under the mercantile system of accounting, the assessee is entitled to claim deduction on the basis of incurring the liability irrespective of the date of payment. Even such liability can be claimed on the basis of provision made where such liability is not quanified. On the other hand, under the cash sy....
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....sidered the facts of the case and the submissions of the A.R. and I find from the assessment order and appellate order for A.Y. 2005-06 that mere was no disallowance made on this count in A.Y. 2005- 06 and hence the disallowance made on the line that such disallowance was made in the earlier year cannot be justified. Further the A.O, has not doubted the payment and the amount has been paid as incentive to staff which is allowable as expenditure, hence, the disallowance made in this respect is directed to be deleted." 12. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 13. We have heard both the parties and gone through the facts of the case. Indisputably, the aforesaid amount has been paid to staff by way of incentives. Since the genuineness of payment was not doubted while deduction was allowed on account of similar payment in the preceding year, the ld. CIT(A) allowed the claim in the year under consideration. In fact, the AO himself found on verification that an amount of Rs.50,000/-....