TaxTMI 
TaxTMI 
2013 (5) TMI 609
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....ficer to disallow deduction of brokerage expenses of Rs.35,26,400/- as claimed by the appellant for A.Y. 2005-06. 4. On the facts and circumstances of the case the Commissioner of Income-tax has erred in concluding that the current year depreciation and brought forward depreciation cannot be adjusted against capital gains for assessment year 2005-06. the appellant submits that as per the provisions of Income tax Act, 1961 the appellant is entitled to set off current year depreciation and brought forward depreciation against the capital gains of A.Y. 2005-06. The conclusion reached by the Learned Commissioner of Income tax is erroneous and is contrary to the provisions of Income tax Act, 1961." 3. Briefly stated, assessee filed its return of income declaring total income at Rs.1,55,72,469/-. The return was subjected to scrutiny under section 143(3) by the DCIT-8(2), Mumbai and vide order dated 20.12.2007 the total income was computed to an extent of Rs.3,10,47,410/-. The AO, inter alia, called for details and made adjustments to the claim of set off of unabsorbed depreciation of earlier years. This order was subjected to proceedings under section 263 by the CIT-8, Mumbai on th....
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....ed by M/s. Ovira Logistics Pvt. Ltd. to show that M/s. Ovira Logistics Pvt. Ltd. has actually paid any taxes on the alleged brokerage received by it. Probably, M/s. Ovira Logistics is a loss incurring company and transfer of profits from a subsidiary company by the holding company is basically for the purpose of reducing the tax liability as otherwise there is no business justification. Thus, the claim of brokerage made by the assessee is neither genuine because the assessee has failed to produce evidence of experience and expertise in the business of brokerage by M/s. Ovira Logistics Pvt. Ltd. and the payment is highly excessive keeping in view of the provisions of section 40A(2)(b) of the I.T. Act. Since the AO has failed to make enquiry by examining the facts property, the assessment made by her by accepting the claim of brokerage is erroneous and the same is prejudicial to the interest of the revenue. Accordingly, the assessment made by the Assessing Officer is modified to the extent that the brokerage expenses of Rs.35,26,400/- are liable to be disallowed and the Assessing Officer shall re-compute the income by disallowing the brokerage expenses. 5. The Counsel for the asse....
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....that the details of the incomes by the said company are placed before the CIT in the course of proceedings under section 263. With reference to genuineness of the claim it was submitted that the assessee was negotiating for sale of property and the said holding company is in the business of consultation and brokerage and referred to the incomes earned by the said company, placed in the paper book. It was further submitted, referring to the papers placed before the authorities and also in the paper book, that originally the M/s. Ovira Logistics Pvt. Ltd. demanded 3% commission on the sale value which was reduced to 2% after obtaining quotations from Satguru Estate and also Laxmi Housing Agency. These quotations were at 2.75% and 2.5% of the sale amount. It was further submitted that the CIT again invoked provisions of section 40A(2)(b) when the incomes were offered under section 50 as capital gains. With reference to the second issue of claim of depreciation, he referred to the details placed before the authorities about year-wise carried forward depreciation and submitted that consequent to the amendment brought to the Act by Finance Act, 2001 w.e.f. 01.04.2002, current year. 6.....
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.... year 42,050,000 (d) Loan Balance outstanding as on March 31, 2005 39,750,000 5 Interest accrued on Inter-Corporate Deposit 62,189 6 Interest received on Inter Corporate Deposits 6,720,731 7 Closing Balance outstanding a) Debtors (4,638,995) b) Creditors 6,112,101 In addition, in the audit report under section 44AB in Annexure -3 to Form 3CD the details are placed as under: - Sr. No. PARTICULARS Amount No. (Rs.) A Payment made M/s Ovira Logistics Private Limited (Holing Company)Account Head 1 Deputation Exps for Salary Reimbursement 4,391,220 2 Others (Petrol Expenses, labour charges, discount on spars, discount on labour etc.) 258,569 3 Brokerage (Net of Service Tax Rs.3,26,400) 3,200,000 4 Claim for Disputed quality of services rendered 5,000,000 Subtotal 12,849,789 Reimbursement of Director's Salary to Orix Auto & Business Solutions Ltd. 1 Deputation Exps for Salary Reimbursement 1,218,407 Subtotal 1,218,407 TOTAL 14,068,196 In addition, in the deprec....
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....e are of the opinion that the service charges are claimed in the course of regular business transactions for helping the assessee in sale of the property and 2% commission is reasonable when compared to the other quotations placed on record. Further, there is no prejudice caused to the Revenue as the same amount was offered to tax in the hands of the M/s. Ovira Logistics Pvt. Ltd. therefore, we are unable to agree with the findings of the CIT and his direction in this regard to disallow the entire amount. 10. With reference to the issue of claim of unabsorbed depreciation and the findings of the CIT, we are of the opinion that the order of the CIT is erroneous in the eyes of law. As briefly stated, the learned AO did examine the claim of depreciation and he has the following notes made in the order under section 143(3): - "4. The assessee company has claimed set off of unabsorbed depreciation amounting to Rs.(293,74,982/-), against the total income of the assessment year under consideration. However, unabsorbed depreciation of earlier years to the tune of Rs.(1,40,00,039) is only allowed to be set off against the current year's income, since the unabsorbed depreciation of Rs.....