TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 429
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....imed by the assessee as a deduction in computing the income. I have perused the assessment order and considered the written submission and oral submissions made by the Authorised Representative of the appellant. I find that the assessee is engaged in the business of man power recruitment under his proprietary concern Ms Career Probe. On perusal of the audited accounts of the year under consideration I find that the books of account of the concern were duly audited u/s44AB of the Income Tax Act 1961. The appellant had a gross receipt of Rs. 198.70 Lakh and against this the appellant had earned a net profit of Rs. 45.34 Lakh. The appellant had claimed commission expenses of Rs. 79.55 Lakh as expenses in the profit loss account. The AO issued notices to the persons who were placed by the appellant to verify if the party to whom commission was paid had rendered any services. As per the AO all these parties refused using the services of the commission agent and hence while assessing the appellant disallowed a sum of Rs. 51,56,694 on account of commissions expenses and held that the assessee failed to establish that the expenses were incurred for the purpose of assessee business. 4.3....
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....sp; referred by anyone 3 Mark Poply 9,60,000 4,50,000 Refused having utilized your services 4 Rajiv Bhatia 8,50,170.00 4,25,000 Not referred by anyone 5 Suresh Kasi 5,95,833.34 3,50,000 Not referred by anyone, specifically denies knowing the person to whom commissions has been paid 6 Deepti Verma 7,33,480.00 3,50,000 Refused having utilished your services 7 Vinod Zutshi 6,49,425.00 3,00,000 Not referred by anyone 8 Nagendra ED 2,86,500.00 85,000 Not referred by anyone 9 Ankhi Das 10,18,155.00 5,50,000 Refused having utilized your services 10 Subhayu Basu 16,00,000.00 8,00,000 Not referred by anyone 11 Seema Trivedi 4,60,000.00 2,00,000 Not referred &....
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....important and vital information in the business of the assessee. This role of sharing information about the candidate being available for change of job is the key in this business. The assessee had claimed to have made payments for these services to the said agents or persons giving leads. Unless the person to whom the payment was made was not examined no adverse inferences could be drawn. The AO in this case failed to make any inquires with the commission gents. Thus the AO failed to make any inquiries with the commission agents. Thus the AO failed to understand the entire business process and the AO also failed to correctly investigate the matter. U9nelss the agents were not examined by the AO it was not possible for him to come to a finding with respect to the fact that the expenses were incurred for the purpose of the business or not. I find that on this very issue the Assessing Officer has not brought any evidences against the assessee. In my opinion the AO cannot, merely on the inquiry with the candidates come to the conclusion that the commission expenses were not incurred for business. Impugned order rather find that the inquiry with the candidate was irrelevant is also d....
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....sment and no disallowance were made. I therefore hold that the commission expenses were incurred for the business of the assessee. The Hon'ble Supreme Court has held in the case of Sasoon David & Co. Pvt. Ltd. vs. CIT, 118 ITR 261 that it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. It was also held by the Bombay High Court in CIT vs Sigma Paints Ltd 188 ITR 6 that payment of commission is an allowable expenditure if the same is incurred wholly and exclusively for the purpose of business carried on by the assessee. Hon'ble Gujarat High Court in the case of Swastik Textiles Co. Pvt. Ltd. 150 ITR 55 upheld the contention of the assessee about allowability of commission payment on the ground that there was no evidence to support the finding of the Tribunal that services had not been rendered by the commission agents. Hon'ble Supreme Court has also held in the case of Dhanraj Giriji Raj Narshingh Raj, 91 ITR 544 that it was for the assessee to decide how best to protect his own interest and it was not open to department to prescribe what expenditure the assessee should incur and in what circumstances he sho....
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....d circumstances to uphold the CIT(A)'s findings deleting the impugned disallowance under challenge. The Revenue's instant former substantive ground fails accordingly. 4. This leaves us with Revenue's latter grievance seeking to revive Assessing Officer's action disallowing u/s 54F deduction claimed of Rs.56,52,242/- as reversed to the extent of Rs.42,39,181/- in CIT(A)'s order under challenged as follows:- "4.6 Ground No.3 & 4: Both these grounds are interrelated and hence they are taken up for disposal together. This ground is against the rejection of the claim u/s. 54F of the Income Tax Act for Rs. 56,52,242/ The brief facts of the case is that the assessee sold a land at Hasur Sarjapura Road, Bangalore for Rs. 2,52,00,000 against this he paid a brokerage on sale for Rs. 3,60,000. Thus the net sale consideration as per the assessee was Rs. 2,48,40,000. The assessee had purchased this property in the year 2005-2006 for a consideration of Rs. 47,44,163 and the indexed cost of the property was determined at Rs. 74,93,295. Thus the capital gains was determined at Rs. 173,46,704/-. Out of this the assessee invested Rs. 50,00,000 was deposited in bonds eligible u/s. 54FC of the IT a....
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....rcial activities were found to be conducted on the said building. The building comprised of ground plus three stories and also had common service area including basement, stilt floor, terrace and lift. The area of the each floor was 154.32 sq/. mts. And the total area of the building was 715.36 sq. mts. 4.10 I find that the provisions of Section 54F of the IT Act 1961 is a benefit giving section and the same should be constructed liberally. Once an assessee falls within the ambit of a beneficial provision, then the said provision should be liberally interpreted. The Apex Court in the case of Bajaj Tempo Ltd. 196 ITR 188 (SC). A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally, and since as provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not frustrate it. While interpreting the various provisions, the Court must not adopt a hyper technical approach and to apply cut-and-dry formula. A pragmatic approach should be adopted so that the object of the introduction/insertion of a particular provision....
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.... para 42- 45); State Level Committee v. Morgardshammar India Ltd. [(1996) 1 SCC 108]; Novopan India Ltd v. CCE & Customs [1994 Supp (3) SCC 606]; A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala [(2007) 2 SCC 725] and Reiz Electrocontrols (P) Ltd. v. CCE. [(2006) 6 SCC 213]" 4.11. In this case the deduction u/s. 54F it is required that the investment should be made in a residential house. In this case it is seen that the appellant had made an investment in the residential house. The said house was sanctioned to be both residential and commercial. Therefore in my opinion the appellant satisfied the condition of the investment in a residential house and thus the section must be constructed liberally to grant deduction to the appellant to the extent of residential house investment. I therefore hold that the appellant was entitled to deduction u//s 54F of the Act on the investment made in the residential portion. Having held so, it is relevant to segregate the residential and commercial area. The ITO at Bangalore has physically inspected and found that there was a structure and no commercial activity was found. The AITXO opined that as there was a glass facade and this gives a comm....