TaxTMI 
TaxTMI 
2011 (1) TMI 1458
X X X X Extracts X X X X
X X X X Extracts X X X X
....The appellants submit that the payees are not related parties and the fees were paid to them for continuous service regarding supply of information on various companies in which the appellant was interested for their clients as a stock broker. There was no justification for disallowing this amount as the payment is not of any personal nature and is in the course of business. 3. The learned CIT[A] also erred in disallowing payment of Rs. 1,25,000/- as premium for Keyman Insurance Policy. The appellants submit that the risk covered by the policy had commenced during the previous year and therefore the whole amount is allowable as deduction." 2. Ground No.1: After hearing both the parties, we find that assessee has claimed certain bad debts which were not allowed by the AO mainly because assessee has simply showN the brokerage as income and not the whole proceeds and accordingly the conditions laid down in sec.36(2) were not fulfilled. On appeal, the action of the AO was confirmed by the Ld. CIT[A]. 3. Both the parties were heard. 4. We find that this issue is covered in favour of the assessee by the decision of the Special Bench of the Tribunal in the case of Dy. CIT vs. Shri Sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cript-wise summary of Vijay Textile and Ke Sera Sera shares traded by the assessee, through which it was claimed that shares in Vijay Textiles were traded for ₹ 11,31,36,994/- and shares of Ke Sera Sera were traded for ₹ 31,86,60,326/-. Ultimately, assessee was asked to produce the party for verification. The party was not produced. However, it was mentioned vide letter dated 17-12-2007 that M/s. Swiss Consultancy had provided day-to-day information in respect of shares of Ke Sera Sera Ltd. and on the basis of that information assessee had provided information [tipes] to its customers and assessee had earned brokerage of ₹ 12,23,760/- on the shares of Ke Sera Sera Ltd. Similarly, no details were filed in respect of research report etc. from M/s Premium Investment. 6. The AO examined all the submissions and observed that average rate of brokerage of the assessee comes to 0.17% which was calculated on the basis of the total brokerage divided by the total turnover and even if it is assumed that 50% transactions were conducted because of the information, then brokerage on account of Ke Sera Sera stock would be ₹ 3,67,027/- and no one would spend a sum of ₹....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rch work worth Rs. 42 lakhs. Swis Consultancy is said to be a division of Supreme Communication Ltd. The analysis of Annual Report for F.Y 04-05 of Supreme Communication reveals that the turnover of Supreme Communication was Rs. 4.40 crores and a profit of Rs. 10 lakhs only. The Director's report states that the operations of the company are:- "The company concentrates on development of software products and it is also engaged in consultancy work on a contract basis. (b) The P & L Account of Supreme Communication at Page 11 of the Annual Report is annexed as Annexure 2. It may be seen that the income includes sales and software consultancy services (there is no mention at all of any consultancy services or research in the equity market.) (c) Similarly, the expenditure part of the P & L Account shows material consume, direct expenses, administrative expenses and depreciation. There is no mention at all of any expenses relating to research in the equity market. Schedule 13 & 14 of the Annual Report is annexed as Annexure 3. It contains details of opening stock and purchases. Directors' remuneration, production charges and travelling and conveyance, wage and salary, but there is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and from Page 18 to 21 contains details regarding auditors remuneration, registration details, cash flow statement and the auditor's certificate at Page 21 the Details of sundry debtors as on 31-3-05 does not have any page numbers at the bottom thus by attaching the same, the appellant has tried to mislead and make one believe that the same is part of the Annual report. (b)The details of sundry debtors as on 31-3-05 shows Ruchiraj Share & Stock Brokers P. Ltd. as sundry debtors of amounts due upto 180 days of Rs. 21,02,400/- only whereas in the books of appellant the amount due to Swis Consultancy is shown at Rs. 39,84,130/-. (c) The Ledger Account of the appellant shows the payment to Swis Consultancy [no mention of division of Supreme Communication Ltd] on 17-5-05 of Rs. 9,47,700/- Rs. 9.47.700/- and Rs. 10,44,365/-, the cheques were cleared on 18-5-05, 12-7-05 and 8-8-05 [as written in hand] and the 4th payment is on 13-9-05 of Rs. 10,44,365/- cleared on 14-9-05. Thus, it is abundantly clear that no payment has been made by the appellant to Swis Consultancy [the supposed division of Supreme Communication Ltd.] during that year but in subsequent year. The account of sundry de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded May 28, 2004 to 4th June, 2004 is at Annexure A, Pages 14. While going through this report it is obvious that the report does nto containany information which is more than the information easily available in Newspapers like Economic Times, Financial Express or even Business pages of any National Newspaper or in the various Business TV Channels. The cost of all newspapers and channels would be around Rs. 300/- per month, for example, not more than Rs. 4,000/- per year and the appellant has paid an amount in excess of Rs. 21.02 lakhs. (iv) The debit note of Premium Investment, Address: ab-4, Silver Towers, Aquem Margao, Goa shows narration "being amount debited to your account towards our professional charge for equity research made on your behalf during the year of Rs. 5,00,000/- Service tax Rs. 50,000/- and Education Cess Rs. 1,000/-". The appellant has submitted copy of PAN, Service tax registration certificate, Sales tax registration certificate and an order u/s.154 in case of Premium Investment showing total loss for the year at Rs. (-) 1,75,50/- but no evidence of any equity research made was furnished. 2.9.5 (i) The appellant states that he is the best person to judge ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....12,23,760/- and Rs. 4,71,268/- respectively. The assessee, vide letter dated 20-12-07 to AO mentioned the loss in case of K Sera Sera of Rs. 1,34,160/- and profit in case of Vijay Textiles of Rs. 3,44,169/-. In its own trading however as per details submitted by the appellant they have not traded in case of K Sera Sera shares and only 1,000 shares of Vijay Textiles were purchased and sold in which profit was Rs. 9,122/-. 2.9.9 Such a Long delay in Payments - The debit notes are of 16 July, 5 Oct of 2005 & 5 January & 31 March of 2005 but the payment of Swis Consultancy are on 17-5-05 of Rs. 9,47,000/-, Rs. 9,47,000/- and Rs. 10,44,365/-, the cheques were cleared on 18-5-05, 12-7-05 and 8-8- 05 [as written in hand] and the 4th payment is on 13-9-05 of Rs. 10,44,365/- cleared on 14-9-05. Such long delay for payments strengthen the new that it is a case of claim of bogus expenses to reduce tax liability. 2.9.10. In view of above, and detailed discussion by Mr. J.T.Narnaware, ITO in the assessment roder from Para 4.9 to 1.13 & Para 5.1 to 5.3, the addition of Rs. 447,55,000 is confirmed." 9. Before us, Ld. Counsel of the assessee reiterated the submissions made before the AO and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e reproduce one of the reports which is as under: "SWISS CONSULTANCY K Sera Sera Production Ltd. Company Background K Sera Sera Production is an Indian based company, provides entertainment related services. The company is providing, distributing & financing films & television serials BSE listed Garnet Paper mills limited was taken over by present promoters & named K Sera Sera Production Ltd. in 2002. Industry scenario The entertainment industry has undergone a Sea change in last decade Film production budget of Bollywood films have started shooting up to 25 Crores for a film. Film music also has become a big source of revenue. It has become high risk high return business which requires corporate finance for big projects. Subhash Ghai, Pritish Nandi, Padmalaya films & G.V.Films are other big names which have become public listed companies in last 10 years. Business model Corporatization, Internationalization and de-risking from the cornerstones of K Sera Sera business model. De-Risking Given the fact that the entertainment industry is inherently risky, de-risking operations form a major part of K Sera Sera's strategy. This takes several forms, from building a di....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... companies' financial performance. Valuation & Recommendation Growth strategy of the company is likely to result in mega hits to the credit of the company, resulting in decent profit & bottom line. We expect EPS to cross face value next year. At the current market price, the stock offers chance of 25 to 30 per cent appreciation over the next 12 months. FOR SWISS CONSULTANCY Sd/-" The above report clearly shows that it is a day-to-day information which is easily available from daily newspapers like Economic Times or from internet. This can hardly be called research report. Further we find that the assessee has shown the outstanding amount of M/s Supreme Communication at ₹ 39,84,130/- whereas in the balance14 sheet of M/s Supreme Communication amount outstanding against the assessee is ₹ 21,02,400/- and no effort was made by the Ld. Counsel of the assessee to explain this discrepancy. This further shows that only the accommodation bills have been obtained by the assessee. In this background, we find that the order passed by the ld. CIT[A] is very reasonable containing all the reasons and, therefore, we confirm the same. 12. Ground No.3: After hearing both the pa....