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TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1500
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.... declaring total income of Rs. 48,47,710/-. The return of income so filed was selected for scrutiny. In course of assessment proceedings, the A.O. while verifying the return of income and financial statements noticed that the assessee has debited an amount of Rs. 29,96,390/- towards sales promotion expenses. After calling for necessary details and verifying them, he found that out of such sales promotion expenses, an amount of Rs. 28,50,093/- was paid to 14 persons towards commission. When called upon to explain the nature of such expenses, the assessee submitted that he has tied up with certain persons who procure potential customers for buying insurance policies. The assessee submitted that the job of such sub agents are limited to identifying potential customers and not beyond that. He submitted, it is the assessee who undertakes the entire exercise of convincing the customers and making them agree to buy insurance policies through him. He submitted, only for identifying and referring the customers to the assessee, some amount is paid to those persons. Hence, the expenditure being for the purpose of business, is allowable. After taking note of the submissions of the assessee, th....
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.... to five individuals without deducting tax at source. Being of the view that amount paid is in the nature of insurance commission, provision of section 194D of the Act is attracted. Since the assessee had failed to deduct tax in terms with section 194D of the Act, the A.O. disallowed an amount of Rs. 2,92,102/- u/s. 40(a)(ia) of the Act, being 30% of the referral commission allowed as expenditure to the assessee after the adhoc disallowance of 30% out of the amount of Rs. 13,90,961/-. 8. Though the assessee contested, the aforesaid disallowance before learned first appellate authority, however, he was unsuccessful. 9. Before us, ld. Counsel appearing for the assessee submitted that section 194D of the Act is not at all applicable to the assessee as it is applicable to insurance commission paid by an insurance company to registered agents. In this context, he drew our attention to section 42 of The Insurance Act, 1938. Drawing our attention to the said provision, he submitted that a person can become an Insurance Agent only if he is not disqualified for any of the reasons mentioned fulfills all the criteria under sub section (3) of section 42 of the Insurance Act. He submitted....
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....e assessee to some persons who may be interested to take out life insurance policy. There role is to that limited extent. Keeping in perspective the aforesaid position, if we examine section 194D of the Act, it speaks of insurance commission paid for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance). If we consider the role played by the individuals to whom the assessee has paid the referral commission, keeping in perspective the specific provision of section 194D of the Act, it can be seen that such individuals are nowhere involved in soliciting or procuring insurance business or has played any role in continuance, renewal or revival of policies of insurance. Section 42 of the Insurance Act lays down the procedure for appointment of Insurance Agents, which reads as under: Section 42 in The Insurance Act, 1938 42. Appointment of insurance agents (1) An insurer may appoint any person to act as insurance agent for the purpose of soliciting and procuring insurance business: Provided that such person does not suffer from any of the disqualifications mentioned in su....
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....ovision of this Act, shall be liable to a penalty which may extend to ten thousand rupees and any insurer or any person acting on behalf of an insurer, who appoints any person as an insurance agent not permitted to act as such or transacts any insurance business in India through any such person shall be liable to penalty which may extend to one crore rupees. (5) The insurer shall be responsible for all the acts and omissions of its agents including violation of code of conduct specified under clause (h) of sub-section (3) and liable to a penalty which may extend to one crore rupees. (1) The Authority or an officer authorised by it in this behalf shall, in the manner determined by the regulations made by it and on payment of the fee determined by the regulations, which shall not be more than two hundred and fifty rupees, issue to any person making an application in the manner determined by the regulations, a licence to act as an insurance agent for the purpose of soliciting or procuring insurance business: Provided that,-- (i) in the case of an individual, he does not suffer from any of the disqualifications mentioned in sub-section (4); and ....
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.... competent jurisdiction: Provided that where at least five years have elapsed since the completion of the sentence imposed on any person in respect of any such offence, the Authority shall ordinarily declare in respect of such person that his conviction shall cease to operate as a disqualification under this clause;(d)that in the course of any judicial proceeding relating to any policy of insurance or the winding up of an insurance company or in the course of an investigation of the affairs of an insurer it has been found that he has been guilty of or has knowingly participated in or connived at any fraud, dishonesty or misrepresentation against an insurer or an insured.(e)that he does not possess the requisite qualifications and practical training for a period not exceeding, twelve months, as may be specified by the regulations made by the Authority in this behalf;(ea)that in the case of a company or firm making an application under sub-section (1) or sub-section (3), a director or a partner or one or more of its officers or other employees so designated by it and in the case of any other person, the chief executive, by whatever name called, or one or more of his employee....