TaxTMI 
TaxTMI 
2018 (11) TMI 429
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....wance of commissions expenses of Rs. 51,56,694/- claimed 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 expense....
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.... fees received Commission paid Remarks 1 Rohit Dhondy 4,14,166.67 5,00,000 Commission paid is more than placement fees received 2 Vineet Chhabra 34,82,925.00 4,50,000 Not 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  ....
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....iscreet information. Such discreet information is available directly from the prospective candidate who meets the requirement of the client and is ready to leave his/her present assignment and take a new job. Only if this information is available then the assessee is able to move further. This information is available only with the persons who has direct knowledge that a particular candidate is interested in leaving his/her existing job or such information is available indirectly i.e. a close associate of the proposed candidate reveals such information about the interest of the candidate to change his job. This is the most 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 u....
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....ils including payment by cheques bills and recipients income tax PAN details, the name of candidates and their CV and the job to which they were placed was also provided I thus find that the AO failed to carry out any relevant enquiry in this respect. I find that in the preceding year i.e. assessment year, the assessee was engaged in the same business and also taken services from the parties and paid commission to them and no disallowance was made by the AO. I also find that in AY 2013-2014 the assessee case was assessed u/s.143(B) of the IT Act 1961 by the same office and the commission expenses paid were duly accepted in scrutiny assessment 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 b....
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....S; wherever necessary. There has not been any enquiry on part of the Assessing Officer to find out as to whether all these parties who have not supported assessee's case have claimed the corresponding TDS credit or not is respective tax records. Coupled with this, we find that the Assessing Officer has also not carried out the necessary verification on assessee's ultimate customers/clients who have appointed the highly qualified personnel through the assessee. The Revenue further fails to rebut the fact that similar commission payments have already been accepted as allowable in latter assessment years (supra). We therefore take into account all these facts and 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.....
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.... as per his estimate the cost of construction of 2nd floor was to be determined by dividing the entire area for the building including terrace and lift room etc and the cost for the second floor was to be estimated at 15% lower than the average cost. The AO thus held that even if the deduction was to be allowed the deduction should be Rs. 14,98,481 instead of Rs. 56,52,242. 4.9 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 building was sanctioned as residential and commercial building however on physical verification of the building by the ITO t Bangalore no commercial 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 b....
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....al construction. (See Union of India v. Wood Papers Ltd. [(1990) 4SCC 256: 1990 SCC (Tax) 422] and Mangalore Chemicals and Fertilisers Ltd. v. CCT [1992 Supp (1) SCC 21] to which reference has been made earlier.)" 22. In G.P. Ceramics (P) Ltd. v. CTT (2009) 2 SCC 90], this Court has held: (SCC pp. 101-102, para 29) "29. It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. [See CTT v. DSM Group of Industries [(2005) 1 SCC 657] (SCC para 26); ITSCO Ltd. v. State of Jharkhand [(2005) 4 SCC 272] (SCC 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....