TaxTMI 
TaxTMI 
2017 (5) TMI 353
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....-. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 26.12.2005 wherein the assessed loss determined at Rs. 1,14,60,051/- was allowed to be carried forward. 2.2 Aggrieved by the order of assessment dated 26.12.2005 for A.Y. 2004-05, the assessee preferred an appeal before the CIT(A)-18, Mumbai. The learned CIT(A) disposed off the appeal vide the impugned order dated 07.03.2014 allowing the assessee partial relief. 3. Being aggrieved by the order of the CIT(A)-18, Mumbai dated 07.03.2014 for A.Y. 2004-05 the assessee has preferred this appeal, raising the following grounds: - "1. On the Facts and circumstances of the case and in law, the CIT(A) has erred in confirming the disallowance of depreciation of Rs. 36,76,397/- on Business Development rights; 2. On the Facts and circumstances of the case and in law, the CIT(A) has erred in dismissing the ground No.2 and thereby confirming the disallowance of claim for the brought forward losses made under the provisions of Section 72A(6) read with 47(xiv) Proviso(c) of the Act; 3. On the Facts and circumstances of the case and in law, the CIT(A) has erred in not allowi....
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....ence to controvert the findings of the authorities below and therefore the assessee's ground ought to be dismissed. 5.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. On a perusal of the impugned order, we find that the learned CIT(A) has dealt with this issue at length and rendered his findings at para 2.4 thereof which is extracted hereunder: - "2.4 1 have considered the submissions of the appellant, order of the AD and facts of the case carefully. It is noticed that the assessee has claimed depreciation @ 25% on the business development rights. During the assessment proceedings the AO has called for complete details and the nature of assets which has come into existence by incurring the expenditure of preoperative expenses. in response to this show cause notice the AR of the appellant has submitted its reply that the assessee has taken out the business and asset liability of MIs. JLI Insurance Brokerage Ltd, a proprietary concern of Shri Vasant Raj Pandit. It was also submitted that the business development rights were preoperative expenses which were incurred for training of their staff and identifying various locatio....
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....14. However, the assessee vide letter dated 06.01.2014 again asked to grant a further time of twenty days to submit the requisite information. Since no details were filed, the Assessee vide letter dated 03.02.2014 has been again asked to furnish the same latest by 11.02.2014. Finally, on. 14.02.2014, following details sent by the Assessee by post have been received in this office - 1. Copy of application form in the appeal submitted by Vasant Raj Pandit who was the proprietor of the JLI insurance Brokerage Company (taken over by PAN Insurance Brokerage Company Pvt. Ltd in the F.Y. 2003-04). 2. Copy of Balance Sheet of JLI Insurance Brokerage Company for the FY 2002-03. 3. Copy of Balance Sheet of PAN Insurance Brokerage Company Private Limited for the FY. 2003-04, 4. Copy of Notice for Remand Report. In the instant case, the Assessee was asked to furnish the details which had been submitted by the assessee in course of assessment proceedings for A Y 2003-04 in respect of' The 'Business Development Expenses' in support of its claim of depreciation for that year, along with copy of assessment order passed for the AY 2003-04. It is seen that other than appeal memo, a....
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....d circumstances as discussed above, it is obvious that the assessee has failed to establish its claim. As regards the claim of depreciation on computer and furniture and fixtures, the assessee was specifically asked for the full address of the location where it is installed along with name and address of the party who had carried out the installation of computers and furniture and fixtures. For this also, the assessee has merely filed a typed statement. The assessee has not been able to give the address where it is installed. It has only mentioned at the top of the Annexure-IV "originally sever installed at Transmission House, Marol Coop.Indl. Estate, Andheri(E)". Presently, the assessee has no business activity at the above address as stated by the Representative. In this situation, I am not in a position to accept that the assessee has made any addition to the block of assets as mentioned in the Schedule II (Fixed Assets) to the Audit Report of JLI Insurance Brokerage Company. As mentioned earlier onus is on the assessee to establish its claim. It has failed even to furnish the location where it has installed the computers and servers and also the furniture and fixtures. Accord....
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....ught forward losses u/s. 72A(6) r.w.s. 47(xiv) of the IT. Act. But the AO has held that as per the proviso (c) to section 47(xiv) the sole proprietor cannot receive any consideration or benefit directly or indirectly in any form or manner other than by way of allotment of shares in the company. But in the present case the AO has observed that the assessee company has paid 2,13,23,484/- to one Frontier Trading a proprietary concern of Shri Vasant Raj Pandit. Thus the condition of section 72A(6) r.w.s. 47(xiv) and proviso (c) to section 47(xiv) are not fulfilled because Shri Vasant Raj Pandit, proprietor of M/s. Frontier Trading has received indirect benefit in the nature of market Intelligence collection charges from the assessee company. In the proviso it is very clear that the proprietor cannot receive any consideration or benefit directly or indirectly in any form or manner other than by way of allotment of shares in the company. On the other hand the AR of the appellant has submitted that the proprietary concern in the name of JLI Insurance Brokerage was paying the market Intelligence collection charges to Frontier Trading Company even before the succession to the appellant comp....
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....rejecting the assessee's claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(XIV) of the Act. Consequently, ground No. 2 of the assessee's appeal is dismissed. 7. Ground No. 3 - Disallowance of Market Intelligence Collection Charges - Rs. 31,00,093/- 7.1 In this ground the assessee challenges the order of learned CIT(A) in giving partial relief and upholding disallowance of Rs. 31,00,093/- on account of market intelligence collection charges. 7.2 According to the learned D.R. for Revenue the AO on noticing that the assessee claimed market intelligence expenses of Rs. 2,13,23,484/- @ Rs. 450/- per customer, required the assessee to furnish details and evidence in respect of incurring of such expenses; leading to the expenses claim being reduced to Rs. 46,50,139/- @ Rs. 150/- per customer without any explanation being put forth for the same. The AO restricted the same expenditure to Rs. 7,54,023/- @ `25/- per customer, resulting in disallowance of Rs. 38,75,116/-. The learned D.R. submits that on appeal the learned CIT(A) affirmed the view of the AO that the expenses claimed by the assessee @150/- per customer was excessive and not established,....
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....g Co. does not reveal any specialized or skilled operation as claimed by the assessee. Further, the assessee had a functional marketing team to organize and collect such information. Further it was noticed that Rs. 1,07,18,000/- as salaries was paid to the marketing, personnel. Further the payments between the company where the director holds the substantial shares and his proprietary concern. Therefore, the reasonableness of the payment made to M/s. Frontier Trading Co. was in doubt. It was also observed by the AO that the Income of the insurance company is as low as Rs. 50/- per person in certain policies, payment of Rs. 150/- was shown for collecting the information about the prospective customer. It also observed that the income of the assessee from the policy varies from Rs. 50/- onwards. In view of these facts and circumstance the AO has scaled down the payment @ Rs. 25/- per person in place of Rs. 150/- per customer claimed towards gathering of market intelligence and allowed Rs. 7,75,023/- and the balance amount of Rs. 38,75,116/- was disallowed and added back. 4.2 Before me the appellant submitted as under : In the third ground, the appellant has challenged the restric....
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.... submissions of the appellant, order of the AO and facts of the case carefully. It is noticed that the assessee has claimed market intelligence expenses at Rs. 46,50,139/-. The AO has called for details and evidence relating to these expenses. The AR of the appellant has submitted its reply. After considering the same the AO has held that earlier the assessee company has shown the market intelligence expenses at Rs. 2,13,23,464/- @ 450 per customer but it was reduced to Rs. 46,50,139/- @ Rs. 150/- per customer during the assessment proceedings. The AO has observed that the market intelligence charges were collected by M/s. Frontier Trading Co., a proprietary concern of Mr. Vasant Raj Pandit who has substantial interest in the assessee company. On the basis of information submitted the AO has analyzed the specimen forms containing the market intelligence as gathered by M/s. Frontier Trading Co. It revealed that no specialized or any skilled application was required for collecting this information. Since the payment was made to Shri Vasant Raj Pandit who is the proprietor of M/s. Frontier Trading Co. Therefore, the AO has held that it was only a colorable device to increase the expen....