TaxTMI 
TaxTMI 
2024 (11) TMI 563
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.... same to be excessive in comparison to income earned by the appellant. The AO had also made estimated disallowance of expense of Rs. 2,10,000/- u/s 37 of the Act holding the same to be personal in nature. 3. Aggrieved the assessee preferred an appeal before the ld. CIT(A) on 15.1.2018. After considering the submissions made by the assessee, the Ld. CIT(A) deleted both the aforesaid disallowances made in the assessment order dated 29.12.2017 u/s 143(3) of the Act. 4. Aggrieved, the Revenue is in appeal before us and has raised the following grounds of appeal:- "1 Whether on the facts and in law, the ld. CIT(A) have erred in allowing the disallowance u/s 57(iii) of the I.T. Act amounting to Rs. 2,30,36,645/- despite the factual finding of the AO that the assessee's financial advisor has charged a fee of Rs. 2,30,36,645/- crore, i.e. more than 75% fee/commission. 2 Whether on the facts and in law, the ld. CIT(A) have erred in allowing the disallowance u/s 37(1) of the I.T. Act amounting to Rs. 2,10,000/- despite the factual finding of the AO that the assessee has income from business and profession incurred by him on bills/vouchers, mostly bills were food bills to the tune of Rs....
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....to understand and address other irregularities in the accounts the assessee had to hire a team of expert professionals being chartered accountants and advocates who could understand the complexities involved in foreign transactions, could analyze these account statements, advise on his investments with ML, could give guidance on applicable laws and who could represent and correspond on his behalf with ML and their attorneys in US and so on. 6.4. The assessee also had to file a claim with FINRA ("Financial Industry Regulatory Authority") in US. Had it not been for the enormous time and efforts put in by the team of expert professionals engaged by the assessee he would have continued to lose his principal what to talk of returns thereon. As a consequence, the assessee has over the period been able to recover and remit to India nearly INR 68,00,00,000 (Indian Rupees Sixty Eight Crores) which have been gainfully invested in India, the returns thereon also form part of the income being offered to tax by the assessee every year. 6.5. Moreover it was also submitted before the learned Assessing Officer that assessee has been offering the income of the trust/investment company every year ....
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....onsultant, who says to the assessee that he should part with 75% of his funds simply because the alternative is to have none of it with him at all. The above, coupled with the argument that the fee charged by the financial advisor (irrespective of its quantum) was not for the purposes of earning such income, but simply for ensuring that the income already earned by the assessee flows back into his custody, as claimed by assessee (which had originally come under threat only because of the casual and lack a daisical approach of the assessee), and thus cannot be allowed as a deduction u/s 57(iii) (as the section requires that the expenditure should be incurred for the purposes of earning such income), the entire quantum of fee paid becomes disallowable." 6.7. This is despite a specific request made to AO in the reply dated 15.12.2017 to the show cause notice that 'Further, it is requested to your goodself to give an opportunity to assessee before taking any adverse view or making any addition on aforesaid point. It was only on 26.12.2017, when the AR of the assessee personally presented before the learned Assessing Officer to submit copies of some documents whose scanned copy was n....
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....e of PunjalaSunithaNarhari 153 - 154 ii) Copy of Form No. 16A of PunjalaSunithaNarahari 190 - 191 iii) Copy of write-up explaining issues with Merrill Lynch and role of the team of professionals and correspondence with Merrill Lynch and there council from/to Adv. PunjalaSunithaNarhari on the dispute. 261 - 274 20,00,000 iii) Anita &Gadia Professional charges for service rendered on accounting, advisory and tax matters during the financial year 2014-15 Evidence Sr. No. Nature of evidences pages of Paper Book i) Copy of invoices of Anita &Gadia Chartered Accountants= 156 - 167 ii) Copy of Form No. 16A Anita &Gadia 192 - 199 iii) Copy of write-up explaining issues with Merrill Lynch and role of the team of professionals and correspondence with Merrill Lynch and there council from/to Adv. PunjalaSunithaNarhari on the dispute. 261 - 274 88,56,777 Total (A) 2,20,92,777 iv) Tour & Travelling expenses of advisors to US for settlement with Merrill Lynch Air fare &Mediclaim policy Evidence Sr. No. Nature of evidences pages of Paper Book i) Copy of invoices of Hopp worldwide Excursions Ltd. 168 - 171 5,59,447 Hotel Accommodation ....
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....Legislature could have ever intended to produce such illogicality. Moreover, it must be remembered that when a profit and loss account is cast in respect of any source of income, what is allowed by the statute as proper expenditure would be debited as an outgoing and income would be credited as a receipt and the resulting income or loss would be determined. It would make no difference to this process whether the expenditure is X or Y or nil; whatever is the proper expenditure allowed by the statute would be debited. Equally, it would make no difference whether there is any income and if so, what, since whatever it be, X or Y or nil, would be credited. And the ultimate profit or loss would be found. We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing by way of expenditure must be debited irrespective whether there is receipt of income or not. That is the plain requirement of proper accounting and the interpretation of section 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be conditional upon the making or e....
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....essional charges of Rs. 2,30,36,645/- holding the same to be disproportionately high: 4.5 On perusal of the submissions given by the AR, it is found besides, it is worth noting that to ensure the inflow of Rs. 2,90,32,094 crore back into the country and in the safe custody of the assessee, the financial advisor charged a fee of Rs. 2,30,36,645/- crore, i.e. more that 75% fee/commission. Nowhere in the world is there a parallel for such high fees/charged for any financial advisor or consultant for any service provided. Normally, fees/commission for such services range from 1.5% of the deal value. Thus, if we apply the test of preponderance of probability, such a transaction appears to be inconceivable and unfathomable. A 75% fee for such service would make the financial advisor akin to a goon, and not a consultant, who says to the assessee that he should part with 75% of his funds simply because the alternative is to have none of it with him at all. 12.2 Manifestly, there was no finding by the AO to dislodge the claims of expenses either on the ground of genuineness or from the angle of commercial expediency. In final analysis, it boiled down to AO's conviction regarding percent....