2017 (7) TMI 772

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....d to its clients to compensate for thier loss which occurred due to negligence of employees of assessee. 3. The brief facts as noted in the assessment order are that assessee is engaged in Marketing of Financial Products of various companies as distributor. The case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that assessee had claimed in its profit and loss account an amount of Rs. 1,54,600/- as expenses on account of compensation for loss of clients. Therefore, the assessee was asked to justify this claim and in reply, the assessee submitted that the amounts were paid to Mr. Tarlochan Singh, Munish Kumar and Mr. Jagmohan Khanna through cheques. It was further submitted that thes....

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....ades of the client within given rates and therefore, the clients had suffered loss and since the losses were suffered by its clients due to fault of its employees and therefore, thier losses were compensated by assessee by issuing the cheques and in this respect, the Ld. AR invited our attention to the copy of bank account of assessee placed at annexure 1, 2 & 3 where the copy of bank accounts reflecting payments made to these persons was placed. The Ld. AR took us to paper book 4, 5, 6 where the receipts issued by these persons of having received compensation was placed. The Ld. AR submitted that the expense was wholly and exclusively incurred for the purpose of business and therefore, was allowable u/s 37 of the Act. The Ld. AR invited ou....

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....ot square off the positions taken by these clients in NIFTY index of National Stock Exchange. Against these losses suffered by these clients, the assessee had compensated them partly through cheques which fact is verifiable from paper book page 1, 2, 3 where a copy of bank account of assessee reflecting payments to these persons is placed. Further the receipts issued by these clients highlights that the said amounts had been received by them as compensation for loss incurred by them on account of negligence on the part of employees of the assessee. All these evidences prove that assessee had really made the payments to these persons and the payments were made on account of losses suffered by them as is apparent from the copy of account of t....