MARSHALL PRODUCE BROKERS COMPANY PRIVATE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(2)(1), MUMBAI

2. The CIT(A) erred in not deleting the addition of Rs. 1,28,38,105/ The CIT(A) erred in not deleting the addition of Rs. 1,28,38,105/ The CIT(A) erred in not deleting the addition of Rs. 1,28,38,105/ - being the difference in the interest income offered to tax under the head Income the difference in the interest income offered to tax under the head Income the difference in the interest income offered to tax under the head Income from other sources as determined under the cash sys from other sources as determined under the cash system followed by the tem followed by the appellant and that as per the mercantile system of accounting without appellant and that as per the mercantile system of accounting without appellant and that as per the mercantile system of accounting without appreciating the fact that the appellant has consistently employed cash appreciating the fact that the appellant has consistently employed cash appreciating the fact that the appellant has consistently employed cash system of accounting for determining its business income. system of accounting for determining its business income.

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 3 Ltd., 5092 , 5092 & 4918/MUM/2024 sums are offered to tax by the Appellant on cash basis so as to avoid sums are offered to tax by the Appellant on cash basis so as to avoid sums are offered to tax by the Appellant on cash basis so as to avoid double taxation of the same sums. double taxation of the same sums.

4. The CIT(A) erred in not deleting th 4. The CIT(A) erred in not deleting the addition of Rs. 2,97,71,374 made by e addition of Rs. 2,97,71,374 made by the AO while computing income for the purposes of minimum alternate tax the AO while computing income for the purposes of minimum alternate tax the AO while computing income for the purposes of minimum alternate tax under section 115JB without appreciating the fact the appellant has under section 115JB without appreciating the fact the appellant has under section 115JB without appreciating the fact the appellant has already determined its book profits based on mercantile system of already determined its book profits based on mercantile system of already determined its book profits based on mercantile system of accounting for the purposes of section 115JB and making an addition or the purposes of section 115JB and making an addition or the purposes of section 115JB and making an addition again results in double taxation. again results in double taxation.

5. The CIT(A) erred in not upholding the appellant's claim for depreciation The CIT(A) erred in not upholding the appellant's claim for depreciation The CIT(A) erred in not upholding the appellant's claim for depreciation on the office premises at Andheri to the extent the premises were used for on the office premises at Andheri to the extent the premises were used for on the office premises at Andheri to the extent the premises were used for the purposes of the purposes of the appellant's business. The CIT(A) further erred in not the appellant's business. The CIT(A) further erred in not appreciating that once the asset has entered into the block of assets on appreciating that once the asset has entered into the block of assets on appreciating that once the asset has entered into the block of assets on which depreciation has been allowed in the first year, depreciation cannot which depreciation has been allowed in the first year, depreciation cannot which depreciation has been allowed in the first year, depreciation cannot be denied in the subsequent years. be denied in the subsequent years.

6. The CIT(A) erred in upholding the addition of deemed notional rental erred in upholding the addition of deemed notional rental erred in upholding the addition of deemed notional rental income of Rs. 26,94,240 made by the AO in respect of the 60 percent of the income of Rs. 26,94,240 made by the AO in respect of the 60 percent of the income of Rs. 26,94,240 made by the AO in respect of the 60 percent of the Andheri office premises without appreciating that the said premises were Andheri office premises without appreciating that the said premises were Andheri office premises without appreciating that the said premises were used by the Appellant for the purposes of its busi used by the Appellant for the purposes of its business.

7. The CIT(A) erred in upholding the addition of Rs. 19,000 in respect of the 7. The CIT(A) erred in upholding the addition of Rs. 19,000 in respect of the 7. The CIT(A) erred in upholding the addition of Rs. 19,000 in respect of the rental income received by the appellant for the let out portion of the rental income received by the appellant for the let out portion of the rental income received by the appellant for the let out portion of the Andheri premises without appreciating that the said amount had already Andheri premises without appreciating that the said amount had already Andheri premises without appreciating that the said amount had already been offered to tax in the sub been offered to tax in the subsequent year. The CIT(A) erred in not deleting the disallowance made by the AO in The CIT(A) erred in not deleting the disallowance made by the AO in The CIT(A) erred in not deleting the disallowance made by the AO in respect of society charges and property taxes paid by the appellant in respect of society charges and property taxes paid by the appellant in respect of society charges and property taxes paid by the appellant in respect of its office premises at Mumbai and Delhi. respect of its office premises at Mumbai and Delhi.

9. The CIT(A) erred in not deleting the disallowanc 9. The CIT(A) erred in not deleting the disallowance made by the AO of e made by the AO of business promotion expenses aggregating to Rs. 1,51,740/ business promotion expenses aggregating to Rs. 1,51,740/ business promotion expenses aggregating to Rs. 1,51,740/- without appreciating that the said expenses were incurred for the purpose of the appreciating that the said expenses were incurred for the purpose of the appreciating that the said expenses were incurred for the purpose of the Appellant's business. Appellant's business.

3. Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee is mainly engaged in earning brokerage brokerage income by way of arranging charter arranging charter for vessels/tankers saili for vessels/tankers sailing in international waters for various ng in international waters for various clients like Shipping corporation of India, Indian clients like Shipping corporation of India, Indian Oil Corporation, Oil Corporation, Bharat Bharat Bharat Petroleum Petroleum Petroleum Corporation Corporation Corporation Ltd., Ltd., Ltd., Hindustan Hindustan Hindustan Petroleum Petroleum Petroleum Corporation Ltd. etc. The assessee filed return of income for the Corporation Ltd. etc. The assessee filed return of income for the Corporation Ltd. etc. The assessee filed return of income for the year year year under under under consideration consideration consideration declaring declaring declaring total total total income income income at at at Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 4 Ltd., 5092 , 5092 & 4918/MUM/2024 Rs.25,43,57,419/- under the normal provisions of the Income under the normal provisions of the Income under the normal provisions of the Income-tax Act, 1961 (in short ‘the Act’) and Rs.25,28,55,778/ t, 1961 (in short ‘the Act’) and Rs.25,28,55,778/- - as book profit u/s 115JB of the Income u/s 115JB of the Income-tax Act, 1961 (in short ‘the Act’) on tax Act, 1961 (in short ‘the Act’) on 23.09.2016. The return of income filed by the assessee was selected 23.09.2016. The return of income filed by the assessee was selected 23.09.2016. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Act were for scrutiny assessment and statutory notices under the Act for scrutiny assessment and statutory notices under the Act issued and complied with. In the assessment completed u/s 143(3) issued and complied with. In the assessment completed u/s 143(3) issued and complied with. In the assessment completed u/s 143(3) of the Act on 22.12.2018, the Assessing Officer made various of the Act on 22.12.2018, the Assessing Officer made various of the Act on 22.12.2018, the Assessing Officer made various additions/disallowances to the returned income. additions/disallowances to the returned income. On f On further appeal, the Ld. CIT(A) partly sustained the additions. partly sustained the additions. Aggrieved Aggrieved with the additions sustained by the Ld. CIT(A), the assessee is in appeal additions sustained by the Ld. CIT(A), the assessee is in appeal additions sustained by the Ld. CIT(A), the assessee is in appeal before the Income-tax Appellate Tribunal (in short ‘the Tribunal’) tax Appellate Tribunal (in short ‘the Tribunal’) tax Appellate Tribunal (in short ‘the Tribunal’) raising the grounds as reproduced above. raising the grounds as reproduced above.

5. The ground Nos s. 1 to 3 of the appeal of the assessee relate to . 1 to 3 of the appeal of the assessee relate to addition made in respect of business receipt of Rs.1,69,14,269/- addition made in respect of business receipt of Rs.1,69,14,269/ addition made in respect of business receipt of Rs.1,69,14,269/ and interest receipt of Rs.1,28,38,105/ and interest receipt of Rs.1,28,38,105/- respectively. Before the respectively. Before the Assessing Officer, the assessee submit Assessing Officer, the assessee submitted that it was following cash ted that it was following cash system of accounting for system of accounting for declaring its business income its business income for income- tax purposes and said cash system of accounting was being tax purposes and said cash system of accounting tax purposes and said cash system of accounting followed consistently in the past and accepted by the Income-tax followed consistently in the past and accepted by the Income followed consistently in the past and accepted by the Income Department. As per the Department. As per the profit and loss account maintained on cash account maintained on cash basis of accounting for income-tax purposes, the assessee shown tax purposes, the assessee shown

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 5 Ltd., 5092 , 5092 & 4918/MUM/2024 brokerage income of Rs.29,45,83,445/ brokerage income of Rs.29,45,83,445/-, exchange , exchange gain of Rs. Nil and profit before tax of Rs.25,28,55,778/ and profit before tax of Rs.25,28,55,778/-. The assessee . The assessee claimed that it also maintained a separat also maintained a separate books of accounts e books of accounts following the mercantile system of accounting mercantile system of accounting for company Act purposes, for company Act purposes, where the brokerage income of Rs.31,02,70,709/ the brokerage income of Rs.31,02,70,709/-, exchange exchange gain of Rs.12,27,005/- and profit before tax at Rs.28,32,84,743/ and profit before tax at Rs.28,32,84,743/- was and profit before tax at Rs.28,32,84,743/ shown. The relevant chart of the var . The relevant chart of the various incomes incomes shown by the assessee for year under consideration for year under consideration as per alleged alleged cash and mercantile system of accounting of accounting has been reproduced by the has been reproduced by the Assessing Officer in the impugned assessment order. For ready Assessing Officer in the impugned assessment order. For ready Assessing Officer in the impugned assessment order. For ready reference, the said chart is reproduced as unde reference, the said chart is reproduced as under:

(Amount in Rs.) Particulars of Receipts as per Receipts as per Receipts as per Variation (Rs.) (Rs.) Amount of Income Mercantile Mercantile alleged Cash Variation added System (Rs.) (Rs.) System (Rs.) to income head Brokerage 310270709 310270709 294583445 156872264 Business Income Interest 40655616 40655616 27817511 12838105 Other Sources Rent 2138500 2119500 19000 House Property Exchange Gain 1227005 0 1227005 Business Income Total 29771374 5.1 The Assessing Officer added the variation in brokerage income The Assessing Officer added the variation in brokerage income The Assessing Officer added the variation in brokerage income amounting to Rs.1,56,87,264/ 56,87,264/- along with variation in exchange along with variation in exchange gain of of Rs.12,27,005/- Rs.12,27,005/ and and thus thus made made total total addition addition of of Rs.1,69,14,269/- as business income under the normal provisions as business income under the normal provisions as business income under the normal provisions of the Act. Similarly, of the Act. Similarly, the AO made addition for the variation of the made addition for the variation of the interest income of Rs.1 interest income of Rs.1,28,38,105/- under the head ‘Income from under the head ‘Income from other sources’. Before the Ld. CIT(A), the assessee submitted that Before the Ld. CIT(A), the assessee submitted that Before the Ld. CIT(A), the assessee submitted that Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 6 Ltd., 5092 , 5092 & 4918/MUM/2024 section 145(1) of the Act provides section 145(1) of the Act provides for income chargeable under the income chargeable under the head ‘profit and gains business or profession head ‘profit and gains business or profession’ or ‘income from other income from other sources’ to be computed in accordance with method of accounting be computed in accordance with method of accounting be computed in accordance with method of accounting regularly followed by the assessee and since the assessee was by the assessee and since the assessee was by the assessee and since the assessee was following cash receipt of accounting for past several years, there following cash receipt of accounting for past several following cash receipt of accounting for past several was no justification for adding the income as per the mercantile no justification for adding the income as per the mercantile no justification for adding the income as per the mercantile basis that too when expenses were allowed as per the cash system too when expenses were allowed as per the cash system too when expenses were allowed as per the cash system of accounting. Before the Ld. CIT(A), the assessee submitted that of accounting. Before the Ld. CIT(A), the assessee submitted that of accounting. Before the Ld. CIT(A), the assessee submitted that receipt declared on cash basis might include advances received receipt declared on cash basis might include advances receipt declared on cash basis might include advances also. The assessee relied on the various decisions cited in the he assessee relied on the various decisions cited in the he assessee relied on the various decisions cited in the submission of the assessee reproduced by the Ld. CIT(A). The Ld. on of the assessee reproduced by the Ld. CIT(A). The Ld. on of the assessee reproduced by the Ld. CIT(A). The Ld. CIT(A) without giving any explicit A) without giving any explicit reasons, simply held that receipt simply held that receipt to the tune of Rs.2,97,52,374/ to the tune of Rs.2,97,52,374/- was not offered to tax and rather was not offered to tax and rather same was deferred to subsequent years same was deferred to subsequent years, therefore, he upheld the therefore, he upheld the addition made by the Assessing Officer addition made by the Assessing Officer, both to business income as , both to business income as well as to Income from other sources. well as to Income from other sources. .

Before us, the Ld. Counsel for the assessee referred to Paper 5.2 Before us, the Ld. Counsel for the assessee referred to Paper Before us, the Ld. Counsel for the assessee referred to Paper Book page 13, which is part of return of income prescribing other which is part of return of income prescribing other which is part of return of income prescribing other where the method of information in the said return of income he said return of income where the mentioned as cash. accounting implied in the previous year is mentioned as cash. Further, the Ld. Counsel for the assessee referred to the Further, the Ld. Counsel for the assessee referred to the Further, the Ld. Counsel for the assessee referred to the , which is available assessment order for for assessment year 2012-13, which is on Paper Book page 65 on Paper Book page 65, wherein in para 4, the Assessing Officer rein in para 4, the Assessing Officer noted that the assessee was following cash system of accounting for noted that the assessee was following cash system of accounting for noted that the assessee was following cash system of accounting for Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 7 Ltd., 5092 , 5092 & 4918/MUM/2024 income-tax purpose and same had tax purpose and same had been consistently followed year been consistently followed year after year. The Ld. Counsel for the assessee relied on the decision of after year. The Ld. Counsel for the assessee relied on the decision of after year. The Ld. Counsel for the assessee relied on the decision of the Hon’ble Delhi High Court in the case of Cyber Media (India) Ltd. hi High Court in the case of Cyber Media (India) Ltd. hi High Court in the case of Cyber Media (India) Ltd. v. CIT reported in 338 ITR 177 (Delhi), decision of Hon’ble Supreme v. CIT reported in 338 ITR 177 (Delhi), decision of Hon’ble Supreme v. CIT reported in 338 ITR 177 (Delhi), decision of Hon’ble Supreme Court in the case of United Commercial Bank v. CIT reported in 240 Court in the case of United Commercial Bank v. CIT reported in 240 Court in the case of United Commercial Bank v. CIT reported in 240 ITR 355 (SC) and decision of Hon’ble Calcutta High Court in the ITR 355 (SC) and decision of Hon’ble Calcutta High Court in the ITR 355 (SC) and decision of Hon’ble Calcutta High Court in the case of Pradip Commercial (P.) Ltd. v. CIT reported in 344 ITR 171 e of Pradip Commercial (P.) Ltd. v. CIT reported in 344 ITR 171 e of Pradip Commercial (P.) Ltd. v. CIT reported in 344 ITR 171 (Calcutta).

5.3 On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) On the other hand, the Ld. Departmental Representative (DR) relied on the order of the lower authorities. relied on the order of the lower authorities.

5.4 We have heard the rival submissions of the parties and We have heard the rival submissions of the parties and We have heard the rival submissions of the parties and carefully perused the relevant material placed on record. The main perused the relevant material placed on record. The main perused the relevant material placed on record. The main issue under consideration pertains to whether the income of the issue under consideration pertains to whether the income of the issue under consideration pertains to whether the income of the assessee should be computed in accordance with the cash system assessee should be computed in accordance with the cash system assessee should be computed in accordance with the cash system of accounting, which has been of accounting, which has been claimed to have been claimed to have been consistently followed by the assessee over the years. followed by the assessee over the years. For verification of this claim For verification of this claim of the assessee, matter was fixed for clarification on 28/01/2025. of the assessee, matter was fixed for clarification on 28/01/2025. of the assessee, matter was fixed for clarification on 28/01/2025. On said date, the ld counsel for the assessee filed copies of balance the ld counsel for the assessee filed copies of balance the ld counsel for the assessee filed copies of balance sheet and profit and loss accounts sheet and profit and loss accounts for last three years claimed to for last three years claimed to have been maintained as per cash method of accounting. On have been maintained as per cash method of accounting. On have been maintained as per cash method of accounting. On perusal of the Significant Accounting and Notes to Account to the perusal of the Significant Accounting and Notes to perusal of the Significant Accounting and Notes to financial statements for all the three year including the assessment financial statements for all the three year including the assessment financial statements for all the three year including the assessment year involved, we find that on we find that only Revenue and Expenses are ly Revenue and Expenses are Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 8 Ltd., 5092 , 5092 & 4918/MUM/2024 accounted on cash basis. accounted on cash basis. Similarly, in balance sheet, current Similarly, in balance sheet, current liabilities have been noted. The ld Counsel explained that those liabilities have been noted. The ld Counsel explained that those liabilities have been noted. The ld Counsel explained that those liabilities are not having impact on the income of the assessee liabilities are not having impact on the income of the assessee liabilities are not having impact on the income of the assessee computed and offered as per cash acco computed and offered as per cash accounting. He submitted that unting. He submitted that AO has rejected the books of account of the assessee and only AO has rejected the books of account of the assessee and only AO has rejected the books of account of the assessee and only substituted the income as per mercantile method. But in our substituted the income as per mercantile method. But in our substituted the income as per mercantile method. But in our opinion, the assessee has followed cash method of accounting for opinion, the assessee has followed cash method of accounting for opinion, the assessee has followed cash method of accounting for recording revenue and expenses item recording revenue and expenses item only and not for balance sheet d not for balance sheet items, which is evident from the submission of the ld Counsel. For items, which is evident from the submission of the ld Counsel. For items, which is evident from the submission of the ld Counsel. For ready reference relevant part of his submission is reproduced as ready reference relevant part of his submission is reproduced as ready reference relevant part of his submission is reproduced as under:

“10. During the hearing, the Hon'ble members had raised a During the hearing, the Hon'ble members had raised a During the hearing, the Hon'ble members had raised a question with respect to the item question with respect to the item Current Liabilities and Current Liabilities and Provisions appearing in the Audited Balance Sheet tendered Provisions appearing in the Audited Balance Sheet tendered Provisions appearing in the Audited Balance Sheet tendered along with the Profit & Loss account maintained as per cash along with the Profit & Loss account maintained as per cash along with the Profit & Loss account maintained as per cash system of accounting. system of accounting.

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 9 Ltd., 5092 , 5092 & 4918/MUM/2024 effect is given in Profit & Loss account as a line i effect is given in Profit & Loss account as a line item after tem after Profit / (Loss) before Taxation. Tax paid from time to time Profit / (Loss) before Taxation. Tax paid from time to time Profit / (Loss) before Taxation. Tax paid from time to time against the above provision is reflected under the head Loans against the above provision is reflected under the head Loans against the above provision is reflected under the head Loans & Advances in balance sheet. The Appellant submits that the & Advances in balance sheet. The Appellant submits that the & Advances in balance sheet. The Appellant submits that the above presentation of tax provision has no bearing with above presentation of tax provision has no bearing with above presentation of tax provision has no bearing with respect to computation of income as per cash basis of to computation of income as per cash basis of to computation of income as per cash basis of accounting followed in accordance with section 145 of the Act. accounting followed in accordance with section 145 of the Act. accounting followed in accordance with section 145 of the Act. In this regard, attention is drawn to the computation of income In this regard, attention is drawn to the computation of income In this regard, attention is drawn to the computation of income at page 1 of the Paper book which refers to Net profit of Rs. at page 1 of the Paper book which refers to Net profit of Rs. at page 1 of the Paper book which refers to Net profit of Rs. 25,28,55,778 as per P 25,28,55,778 as per P & L Account under the head 'Income & L Account under the head 'Income from Business & Profession' which is the figure appearing in from Business & Profession' which is the figure appearing in from Business & Profession' which is the figure appearing in the Cash Profit & Loss Account for financial year 2015 the Cash Profit & Loss Account for financial year 2015 the Cash Profit & Loss Account for financial year 2015 - 16 prior to reduction of provision for taxation of Rs 8,90,36,000 prior to reduction of provision for taxation of Rs 8,90,36,000 prior to reduction of provision for taxation of Rs 8,90,36,000 for the year under consideration. In for the year under consideration. In other words, the provision other words, the provision for taxation is not claimed as deduction from the business for taxation is not claimed as deduction from the business for taxation is not claimed as deduction from the business income computed as per cash system of accounting. income computed as per cash system of accounting. d. Deposit received from Licencee Deposit received from Licencee - Rs. 2,50,000 - Appellant Appellant had rented part of its office premises to Dynacom Tankers had rented part of its office premises to Dynacom Tankers had rented part of its office premises to Dynacom Tankers Management Pvt. Ltd. in financial year Management Pvt. Ltd. in financial year 2013 - 14. An amount 14. An amount of Rs. 2,50,000 was received as Security deposit from the of Rs. 2,50,000 was received as Security deposit from the of Rs. 2,50,000 was received as Security deposit from the Licencee which is refundable and has to be paid back at the Licencee which is refundable and has to be paid back at the Licencee which is refundable and has to be paid back at the time of vacating time of vacating the premises. Accordingly, the same is shown the premises. Accordingly, the same is shown as a Current lia as a Current liability in the balance sheet. The Appellant bility in the balance sheet. The Appellant submits that this item also has no bearing for determination of submits that this item also has no bearing for determination of submits that this item also has no bearing for determination of business income as per cash system of accounting followed by business income as per cash system of accounting followed by business income as per cash system of accounting followed by the appellant. the appellant. e. Employees Contribution to ESIC of Rs. 438 collected from Employees Contribution to ESIC of Rs. 438 collected from Employees Contribution to ESIC of Rs. 438 collected from staff salary - This amount is collected from employee for ESIC This amount is collected from employee for ESIC contribution from his March salary which is paid after the contribution from his March salary which is paid after the contribution from his March salary which is paid after the balance sheet date and, hence, shown as current liability. balance sheet date and, hence, shown as current liability. balance sheet date and, hence, shown as current liability. f. The Appellant, therefore, humbly submits that none of the The Appellant, therefore, humbly submits that none of the The Appellant, therefore, humbly submits that none of the above items have any bearin above items have any bearing with respect to the income g with respect to the income computed as per cash system of accounting followed by the computed as per cash system of accounting followed by the computed as per cash system of accounting followed by the appellant. In light of the above submissions, the appellant prays that its In light of the above submissions, the appellant prays that its In light of the above submissions, the appellant prays that its ground on computation of income as per the cash system of ground on computation of income as per the cash system of ground on computation of income as per the cash system of accounting regularly followed by the accounting regularly followed by the appellant be allowed appellant be allowed.” 5.5 The section 145 of the Act prescribe ection 145 of the Act prescribe to follow either cash or to follow either cash or mercantile system and therefore, assessee have option to follow mercantile system and therefore, assessee have option to follow mercantile system and therefore, assessee have option to follow

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 10 Ltd., 5092 , 5092 & 4918/MUM/2024 either cash or mercantile method of or mercantile method of accounting system accounting system and not hybrid method of accounting. hybrid method of accounting. The relevant provisions of section 145 provisions of section 145 are reproduced as under: reproduced as under:

“[Method of accounting. Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of (1) Income chargeable under the head "Profits and gains of (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, business or profession" or "Income from other sources" shall, business or profession" or "Income from other sources" shall, subject to the provisions of sub subject to the provisions of sub-section (2), be computed in computed in accordance with either cash or mercantile system of accounting accordance with either cash or mercantile system of accounting accordance with either cash or mercantile system of accounting regularly employed regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette (2) The Central Government may notify in the Official Gazette (2) The Central Government may notify in the Official Gazette from time to from time to time [income computation and disclosure from time to time [income computation and disclosure time [income computation and disclosure standards] to be followed by a standards] to be followed by any class of assessees or in ny class of assessees or in respect of any class of income. respect of any class of income. (3) Where the Assessing Officer is not satisfied about the (3) Where the Assessing Officer is not satisfied about the (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or correctness or completeness of the accounts of the assessee, or correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub where the method of accounting provided in sub-section (1) [has section (1) [has not been regularly followed by the assessee, or income has not regularly followed by the assessee, or income has not regularly followed by the assessee, or income has not been computed in accordance with the standards notified under been computed in accordance with the standards notified under been computed in accordance with the standards notified under sub-section (2)], the Assessing Officer may make an assessment section (2)], the Assessing Officer may make an assessment section (2)], the Assessing Officer may make an assessment in the manner provided in in the manner provided in section 144.]” The Hon'ble Supreme Court, in the case of Nalinikant 5.6 The Hon'ble Supreme Court, in the case of The Hon'ble Supreme Court, in the case of Ambalal Mody v. S.A.L. Narayan Row, CIT Ambalal Mody v. S.A.L. Narayan Row, CIT (61 ITR 428), (61 ITR 428), has unequivocally held that unequivocally held that Section 145 of the Income Section 145 of the Income-tax Act is mandatory in nature. Consequently, post the amendment to Section mandatory in nature. Consequently, post the amendment to Section mandatory in nature. Consequently, post the amendment to Section 145, effective from 1st April 1997, the assessee is obligated to om 1st April 1997, the assessee is obligated to om 1st April 1997, the assessee is obligated to maintain its books of account either on a cash or mercantile system of maintain its books of account either on a cash or mercantile system of maintain its books of account either on a cash or mercantile system of accounting. The mixed system of accounting has not been recognized accounting. The mixed system of accounting has not been recognized accounting. The mixed system of accounting has not been recognized or permitted under Section 145 of the Act after the said amendment. or permitted under Section 145 of the Act after the said amendment. or permitted under Section 145 of the Act after the said amendment. Further, in the case of McMillan & Co. (33 ITR 182) (33 ITR 182), the Hon’ble Further, in the case of Supreme Court held that even when the Assessing Officer (AO) Court held that even when the Assessing Officer (AO) Court held that even when the Assessing Officer (AO) accepts the method of accounting followed by the assessee, the AO accepts the method of accounting followed by the assessee, the AO accepts the method of accounting followed by the assessee, the AO

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 11 Ltd., 5092 , 5092 & 4918/MUM/2024 is not bound by the profit figures reflected in the accounts. It is is not bound by the profit figures reflected in the accounts. I is not bound by the profit figures reflected in the accounts. I incumbent upon the AO to identify and substantiate any inherent incumbent upon the AO to identify and substantiate any inherent incumbent upon the AO to identify and substantiate any inherent defects in the accounting system adopted and record a clear finding defects in the accounting system adopted and record a clear finding defects in the accounting system adopted and record a clear finding that such a system does not enable the computation of correct that such a system does not enable the computation of correct that such a system does not enable the computation of correct profits. However, it is not open to the AO to intervene a However, it is not open to the AO to intervene a However, it is not open to the AO to intervene and substitute a different system of accounting than the one consistently followed a different system of accounting than the one consistently followed a different system of accounting than the one consistently followed by the assessee merely because the AO believes an alternate system by the assessee merely because the AO believes an alternate system by the assessee merely because the AO believes an alternate system as has been reiterated in CIT v. Margadarsi Chit CIT v. Margadarsi Chit is preferable as has been Funds (P.) Ltd. [1985] 155 ITR 442 (AP). [1985] 155 ITR 442 (AP). The Delhi bench of the Delhi bench of the tax Appellate Tribunal in the case of Amarpali Mercantile Amarpali Mercantile Income-tax Appellate Tribunal in the case of (P.) Ltd. vs Assistant Commissioner Of Income (P.) Ltd. vs Assistant Commissioner Of Income-Tax [1993] 45 Tax [1993] 45 ITD 386 (DELHI), held that hybrid system of accounting is not held that hybrid system of accounting is not held that hybrid system of accounting is not permitted. The relevant finding of the Tribunal permitted. The relevant finding of the Tribunal is reproduced as is reproduced as under:

ORDER

Because of the amendment now it is obligatory on the part of all the Because of the amendment now it is obligatory on the part of all the Because of the amendment now it is obligatory on the part of all the Companies to record its business transactions only on the basis of Companies to record its business transactions only on the basis of Companies to record its business transactions only on the basis of accrual, that is to say, method of mercantile system of accounting and al, that is to say, method of mercantile system of accounting and al, that is to say, method of mercantile system of accounting and that is why as we have stated earlier the judicial principle that is why as we have stated earlier the judicial principle laid down that is why as we have stated earlier the judicial principle by the Privy Council and Allahabad High Court is directly applicabl the Privy Council and Allahabad High Court is directly applicable. We the Privy Council and Allahabad High Court is directly applicabl further find on reading Section 209 of the Companies Act that Sub further find on reading of the Companies Act that Sub- section (5) prescribes for compulsory compliance by the Company with the section (5) prescribes for compulsory compliance by the Company with the section (5) prescribes for compulsory compliance by the Company with the requirements of amended section and in case of wilfull defaul requirements of amended section and in case of wilfull default by the requirements of amended section and in case of wilfull defaul Company the officials mentioned in Sub-section (6) are punishable with Company the officials mentioned in Sub section (6) are punishable with imprisonment and/or fine. Therefore, the submission of Mr. Vaish that the imprisonment and/or fine. Therefore, the submission of Mr. Vaish that the imprisonment and/or fine. Therefore, the submission of Mr. Vaish that the Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 15 Ltd., 5092 , 5092 & 4918/MUM/2024 company could invite only qualification in the report of the statutory company could invite only qualification in the report of the statutory company could invite only qualification in the report of the statutory auditors if it had not changed over to mercantile system of accounting, is auditors if it had not changed over to mercantile system of accounting, is incorrect. 5.5 The decision in the case of McMillan & Co. (supra) in fact supports 5.5 The decision in the case of (supra) in fact supports the case of the Revenue because it was held that Section 13 the case of the Revenue because it was held that Section 13 which is in para materia with Section 145 does not confer a mere discretionary does not confer a mere discretionary power but in the context it imposed a statutory duty on the Assessing power but in the context it imposed a statutory duty on the Assessing power but in the context it imposed a statutory duty on the Assessing Officer to examine in every case the method of accounting employed by Officer to examine in every case the method of accounting employed by the assessee. In this case we have already stated that the Assessing the assessee. In this case we have already stated that the Assessing the assessee. In this case we have already stated that the Assessing Officer examined the method of accounting employed by the assessee on Officer examined the method of accounting employed by the assessee on Officer examined the method of accounting employed by the assessee on the basis of decision of the Privy Council and Allahabad High Court the basis of decision of the Privy Council and Allahabad High Court the basis of decision of the Privy Council and Allahabad High Court referred to earlier and the Assessing Officer also found that the changed referred to earlier and the Assessing Officer also found that the changed referred to earlier and the Assessing Officer also found that the changed method had been regularly employed and he further agreed that profits method had been regularly employed and he further agreed that profits method had been regularly employed and he further agreed that profits and gains could appropriately be deduced therefrom. and gains could appropriately be deduced therefrom. Similarly the and gains could appropriately be deduced therefrom. decision in the case of A. Krishnaswami Mudaliar (supra) it was held decision in the case of A. Krishnaswami Mudali ar (supra) it was held that Section 13 of the Old Act did not compel the Assessing Officer to of the Old Act did not compel the Assessing Officer to of the Old Act did not compel the Assessing Officer to accept a balance-sheet of cash receipts and out sheet of cash receipts and out-going prepared from the going prepared from the books of accounts but he had to compute the income in accordance with books of accounts but he had to compute the income in accordance with the method of accounting regularly employed by the assessee. the method of accounting regularly employed by the assessee. Similarly the method of accounting regularly employed by the assessee. the decision in the case of Shiv Prasad Ram Sahai (supra) also supports the decision in the case of (supra) also supports the case of Revenue. It was held therein that if the assessee had once the case of Revenue. It was held therein that if the assessee had once chosen the mercantile system and had regularly employed that system it chosen the mercantile system and had regularly employed that system it chosen the mercantile system and had regularly employed that system it was not open to him unilaterally at any time during subsequent was not open to him unilaterally at any time during subsequent was not open to him unilaterally at any time during subsequent accounting year to change that system because the variation could only accounting year to change that system because the variation could only accounting year to change that system because the variation could only be by mutual consent. In this case as we have stated earlier except for y mutual consent. In this case as we have stated earlier except for y mutual consent. In this case as we have stated earlier except for Income-tax purposes, the assessee changed the system of accounting and tax purposes, the assessee changed the system of accounting and tax purposes, the assessee changed the system of accounting and to which consent is accorded by the Assessing Officer. to which consent is accorded by the Assessing Officer. The learned to which consent is accorded by the Assessing Officer. Departmental Representative had placed reliance on Departmental Representative had placed reliance on the decision of Cuttack Bench of the Tribunal in the case of Prajatantra Prachar Samiti Cuttack Bench of the Tribunal in the case of Prajatantra Prachar Samiti Cuttack Bench of the Tribunal in the case of Prajatantra Prachar Samiti (supra) where it was held that the assessee was prohibited from adopting (supra) where it was held that the assessee was prohibited from adopting (supra) where it was held that the assessee was prohibited from adopting regularly one method of accounting for his own purpose and yet another regularly one method of accounting for his own purpose and yet another regularly one method of accounting for his own purpose and yet another method of accounting for Income-tax purposes. Mr. Vaish did not method of accounting fo tax purposes. Mr. Vaish did not controvert this principle by showing how the decision of Cuttack Bench controvert this principle by showing how the decision of Cuttack Bench controvert this principle by showing how the decision of Cuttack Bench was not applicable to the facts of the case. Decision of Punjab and was not applicable to the facts of the case. Decision of Punjab and Haryana High Court in case of Salig Ram Kanhaya Lal Haryana High Court in case of (supra) pressed into service was totally on different point. In that case the assessee who into service was totally on different point. In that case the assessee who into service was totally on different point. In that case the assessee who maintained books on accrual method had received decretal amount, but maintained books on accrual method had received decretal amount, but maintained books on accrual method had received decretal amount, but the decree passed by Lower Court was subject matter of further appea the decree passed by Lower Court was subject matter of further appeal the decree passed by Lower Court was subject matter of further appea and it was held that the amount could not be said to have accrued to the and it was held that the amount could not be said to have accrued to the and it was held that the amount could not be said to have accrued to the assessee. But such is not the case here. The controversy is entirely assessee. But such is not the case here. The controversy is entirely assessee. But such is not the case here. The controversy is entirely different.

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 16 Ltd., 5092 , 5092 & 4918/MUM/2024

6. The ground No. 4 of the appeal of the assessee relate to The ground No. 4 of the appeal of the assessee relate to The ground No. 4 of the appeal of the assessee relate to addition of Rs.2,97,71,374/ addition of Rs.2,97,71,374/- made by the AO to the AO to the book profit for the purpose of section 115JB of the Act the purpose of section 115JB of the Act. The Ld. CIT(A) has noted . The Ld. CIT(A) has noted

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 17 Ltd., 5092 , 5092 & 4918/MUM/2024 the book profit was offered as per the cash system of accounting offered as per the cash system of accounting and therefore, addition made by the AO was justified. Whereas nd therefore, addition made by the AO was justified. Whereas nd therefore, addition made by the AO was justified. Whereas before us, the Ld. Counsel for the assessee submitted that book before us, the Ld. Counsel for the assessee submitted that book before us, the Ld. Counsel for the assessee submitted that book profit for the purpose of purpose of provisions of section 115JB of the Act provisions of section 115JB of the Act, has been worked out on the basis of mercantile system of accounting been worked out on the basis of mercantile system of account been worked out on the basis of mercantile system of account followed under the Companies Act, followed under the Companies Act, and therefore the addition made the addition made by the AO amounts to double addition. to double addition.

6.1 We have heard the rival submissions of the parties and carefully We have heard the rival submissions of the parties and carefully We have heard the rival submissions of the parties and carefully examined the material placed on record. The assessee has examined the material placed on record. The assessee has examined the material placed on record. The assessee has submitted a copy of t submitted a copy of the financial statement prepared under the he financial statement prepared under the mercantile system of accounting, which is available on record at mercantile system of accounting, which is available on record at mercantile system of accounting, which is available on record at page 41 of the Paper Book. In this financial statement, the profit page 41 of the Paper Book. In this financial statement, the profit page 41 of the Paper Book. In this financial statement, the profit before tax has been reported as before tax has been reported as ₹28,32,84,743/-. Upon reviewing . Upon reviewing the return of income, available at pages 12 and 15 of the Paper me, available at pages 12 and 15 of the Paper me, available at pages 12 and 15 of the Paper Book, along with the schedule of Minimum Alternate Tax (MAT) Book, along with the schedule of Minimum Alternate Tax (MAT) Book, along with the schedule of Minimum Alternate Tax (MAT) calculation at paper book paper book page 36, it is noted that the deemed total page 36, it is noted that the deemed total income under Section 115JB of the Income income under Section 115JB of the Income-tax Act has been tax Act has been declared at ₹25,28,55,778/ 25,28,55,778/-. This figure has been computed on the . This figure has been computed on the basis of profit determined under the basis of profit determined under the ‘cash method cash method’ of accounting. The learned counsel for the assessee submitted The learned counsel for the assessee submitted before us before us that the return of income did not accept the figure derived as per the return of income did not accept the figure derived as per the return of income did not accept the figure derived as per the mercantile system of accounting and instead automatically e system of accounting and instead automatically e system of accounting and instead automatically populated the book profit figure from other columns/schedule of populated the book profit figure from other columns populated the book profit figure from other columns the return of income the return of income. Consequently, the assessee separately . Consequently, the assessee separately

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 18 Ltd., 5092 , 5092 & 4918/MUM/2024 declared the income under Section 115JB of the Act, in accordance declared the income under Section 115JB of the Act, in accordance declared the income under Section 115JB of the Act, in accordance with the books prepared under the mercantile system of accounting epared under the mercantile system of accounting epared under the mercantile system of accounting as per the Companies Act. However, no corroborative evidence has as per the Companies Act. However, no corroborative evidence has as per the Companies Act. However, no corroborative evidence has been submitted before us to substantiate this claim. In view of the been submitted before us to substantiate this claim. In view of the been submitted before us to substantiate this claim. In view of the foregoing, we deem it appropriate to remand this matter back to the foregoing, we deem it appropriate to remand this matter foregoing, we deem it appropriate to remand this matter file of the Assessing Officer for verification. The Assessing Officer f the Assessing Officer for verification. The Assessing Officer f the Assessing Officer for verification. The Assessing Officer shall examine whether, in the return of income filed, the assessee shall examine whether, in the return of income filed, the assessee shall examine whether, in the return of income filed, the assessee has declared income under the MAT provisions, i.e., the book profit, has declared income under the MAT provisions, i.e., the book profit, has declared income under the MAT provisions, i.e., the book profit, based on the books of account prepared under the Companies Act. based on the books of account prepared under the Compani based on the books of account prepared under the Compani The assessee is directed to furnish all relevant documentary The assessee is directed to furnish all relevant documentary The assessee is directed to furnish all relevant documentary evidence to support its contention that the income under Section evidence to support its contention that the income under Section evidence to support its contention that the income under Section 115JB of the Act was computed as per the mercantile system of 115JB of the Act was computed as per the mercantile system of 115JB of the Act was computed as per the mercantile system of accounting, in compliance with the provisions of the Companies accounting, in compliance with the provisions of the Compani accounting, in compliance with the provisions of the Compani Act. The Assessing Officer shall consider these documents and Act. The Assessing Officer shall consider these documents and Act. The Assessing Officer shall consider these documents and decide the matter in accordance with law. decide the matter in accordance with law. The ground No. 4 of the The ground No. 4 of the appeal is accordingly accordingly allowed for statistical purposes. allowed for statistical purposes.

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 19 Ltd., 5092 , 5092 & 4918/MUM/2024 of society charges and property taxes in respect of of society charges and property taxes in respect of Andheri Andheri building premises at Mumbai. premises at Mumbai.

7.1 The facts in brief qua the The facts in brief qua the issue in dispute are that assessee issue in dispute are that assessee had acquired a commercial property admeasuring 3745.20 sq. ft. commercial property admeasuring 3745.20 sq. ft. At commercial property admeasuring 3745.20 sq. ft. Andheri Kurla Road for Rs.7,66,75,000/ Andheri Kurla Road for Rs.7,66,75,000/- on 21.05.2013. It is the on 21.05.2013. It is the contention of the assessee that as the whole of the premises were contention of the assessee that as the whole of the premises were contention of the assessee that as the whole of the premises were not required for the own the own business, the management decided the management decided to give a part of premises on rent to minimize ideal cost part of premises on rent to minimize ideal costs. The rental part of premises on rent to minimize ideal cost income from the same was offered income from the same was offered under the head ‘ under the head ‘income from house property’. The Assessing Officer disallowed the claim of . The Assessing Officer disallowed the claim of . The Assessing Officer disallowed the claim of depreciation on the let out depreciation on the let out portion i.e. 40% of the area portion i.e. 40% of the area, which has not been disputed by the assessee. The Assessing Officer held that not been disputed by the assessee. The Assessing Officer held that not been disputed by the assessee. The Assessing Officer held that the balance 60% of the the balance 60% of the property which remained in the assessee’s in the assessee’s possession was not put to use for its business purpose put to use for its business purpose put to use for its business purpose, therefore, depreciation on the same the same could not be availed by the availed by the assessee. The Assessing Officer relied on the order of the Assessing Officer in Assessing Officer relied on the order of the Assessing Officer in Assessing Officer relied on the order of the Assessing Officer in where the Ld. Assessing Officer had assessment year 2014 assessment year 2014-15, where the Ld. Assessing Officer had denied the depreciation denied the depreciation on the ‘Andheri building’ . Before the Ld. . Before the Ld. assessee relied on the order of the ITAT dated CIT(A), the assessee relied on the order of the ITAT dated assessee relied on the order of the ITAT dated 15. However, the Ld. CIT(A) 19.12.2019, for assessment year 2014 for assessment year 2014-15. However, the Ld. CIT(A) observed that assessee had not observed that assessee had not demonstrated that demonstrated that the remaining in the year under 60% of the asset was being put to use 60% of the asset was being put to use in the year under consideration, therefore therefore, the depreciation on 60% portion of on 60% portion of Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 20 Ltd., 5092 , 5092 & 4918/MUM/2024 building was not allowable. The relevant finding of the Ld. CIT(A) is was not allowable. The relevant finding of the Ld. CIT(A) is was not allowable. The relevant finding of the Ld. CIT(A) is reproduced as under : reproduced as under :

“6.15 | have also perused the order of ITAT and found that ITAT has 6.15 | have also perused the order of ITAT and found that ITAT has 6.15 | have also perused the order of ITAT and found that ITAT has relied on finding of CIT (A) that the asset is being put to relied on finding of CIT (A) that the asset is being put to use and ITAT use and ITAT has not given any finding towards asset being put to use as has not given any finding towards asset being put to use as has not given any finding towards asset being put to use as contested by the appellant. Stepping back into CIT (a) order to find contested by the appellant. Stepping back into CIT (a) order to find contested by the appellant. Stepping back into CIT (a) order to find out if such finding has been given by CIT(A) or not, it is observed in out if such finding has been given by CIT(A) or not, it is observed in out if such finding has been given by CIT(A) or not, it is observed in the assessment order for Ay 2016 the assessment order for Ay 2016-17 the AO has dealt with this has dealt with this issue already at para no.6.4.1. It is observed that Cit (a) as well has issue already at para no.6.4.1. It is observed that Cit (a) as well has issue already at para no.6.4.1. It is observed that Cit (a) as well has not give any findings that asset is being put to use, he had direct eth not give any findings that asset is being put to use, he had direct eth not give any findings that asset is being put to use, he had direct eth AO to verify and allow depreciation. AO to verify and allow depreciation. 6.16 The appellant has not proved that remaining 60% o 6.16 The appellant has not proved that remaining 60% od the asset d the asset is being put to use therefore depreciation is not allowable and the is being put to use therefore depreciation is not allowable and the is being put to use therefore depreciation is not allowable and the addition carried out by the Ld.AO is being upheld. addition carried out by the Ld.AO is being upheld.” 7.2 We have heard the rival submissions of the parties and have We have heard the rival submissions of the parties and have We have heard the rival submissions of the parties and have carefully perused the material on record. The sole issue for carefully perused the material on record. The sole issue for carefully perused the material on record. The sole issue for adjudication before us is whether 60% of the adjudication before us is whether 60% of the Andheri building Andheri building was used by the assessee for its business purposes during the used by the assessee for its business purposes during the used by the assessee for its business purposes during the assessment year under consideration. The assessee has placed year under consideration. The assessee has placed year under consideration. The assessee has placed reliance on the decision of the Income Tax Appellate Tribunal (ITAT) reliance on the decision of the Income Tax Appellate Tribunal (ITAT) reliance on the decision of the Income Tax Appellate Tribunal (ITAT) for the preceding assessment year 2014 for the preceding assessment year 2014-15. However, the Revenue 15. However, the Revenue has argued that, in that year, the Learned Commissioner of Income has argued that, in that year, the Learned Commissioner of Income has argued that, in that year, the Learned Commissioner of Income Tax (Appeals) [CIT(A)] had merely directed the Assessing Officer (AO) peals) [CIT(A)] had merely directed the Assessing Officer (AO) peals) [CIT(A)] had merely directed the Assessing Officer (AO) to verify whether 60% of the building was put to use, and such to verify whether 60% of the building was put to use, and such to verify whether 60% of the building was put to use, and such verification was not conclusively carried out while giving effect to verification was not conclusively carried out while givin verification was not conclusively carried out while givin the CIT(A)’s order and t the CIT(A)’s order and the ITAT, therefore, erroneously recor he ITAT, therefore, erroneously recorded that the CIT(A) had verified the use of the 60% portion of the building. In the CIT(A) had verified the use of the 60% portion of the building. In the CIT(A) had verified the use of the 60% portion of the building. In our considered view, whether 60% of the building was put to use in our considered view, whether 60% of the building was put to use in our considered view, whether 60% of the building was put to use in the year under consideration is a factual matter requiring specific the year under consideration is a factual matter requiring specific the year under consideration is a factual matter requiring specific

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 21 Ltd., 5092 , 5092 & 4918/MUM/2024 verification. The determination of its us verification. The determination of its use cannot rest solely on e cannot rest solely on whether it was used in the preceding assessment year. This is a whether it was used in the preceding assessment year. This is a whether it was used in the preceding assessment year. This is a matter of record, and it is essential to verify the actual use during matter of record, and it is essential to verify the actual use during matter of record, and it is essential to verify the actual use during the relevant assessment year. Accordingly, we find it appropriate to the relevant assessment year. Accordingly, we find it appropriate to the relevant assessment year. Accordingly, we find it appropriate to remand this issue to the file remand this issue to the file of the Assessing Officer for fresh of the Assessing Officer for fresh verification. The assessee is directed to provide all necessary verification. The assessee is directed to provide all necessary verification. The assessee is directed to provide all necessary evidence to substantiate that 60% of the building was used for its evidence to substantiate that 60% of the building was used for its evidence to substantiate that 60% of the building was used for its business purposes during the year under consideration. This business purposes during the year under consideration. This business purposes during the year under consideration. This evidence may include details evidence may include details of brokerage activities conducted from of brokerage activities conducted from the premises, the names and roles of employees working from the the premises, the names and roles of employees working from the the premises, the names and roles of employees working from the said building, and any confirmations from those employees. The AO said building, and any confirmations from those employees. The AO said building, and any confirmations from those employees. The AO is also at liberty to examine such employees, if necessary. is also at liberty to examine such employees, if necessary. is also at liberty to examine such employees, if necessary. Additionally, the assessee Additionally, the assessee may submit supporting evidence such as may submit supporting evidence such as records of computer installations or other items used in the records of computer installations or other items used in the records of computer installations or other items used in the brokerage business at the premises. The AO shall consider all brokerage business at the premises. The AO shall consider all brokerage business at the premises. The AO shall consider all evidence presented and adjudicate the matter in accordance with evidence presented and adjudicate the matter in accordance with evidence presented and adjudicate the matter in accordance with the law. The ground No. 5 of t The ground No. 5 of the appeal of the assessee is he appeal of the assessee is accordingly allowed for statistical purposes. accordingly allowed for statistical purposes.

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 22 Ltd., 5092 , 5092 & 4918/MUM/2024 back to the file of the Assessing Officer back to the file of the Assessing Officer for deciding deciding on the basis of the documentary evidence furnished by the assessee to support the documentary evidence furnished by the assessee to support the documentary evidence furnished by the assessee to support that building was used for the purpose of business. The ground No. that building was used for the purpose of business. that building was used for the purpose of business. 6 of the appeal of the assessee is accordingly allowed for statistical 6 of the appeal of the assessee is accordingly allowed for statistical 6 of the appeal of the assessee is accordingly allowed for statistical purposes 8.1 The ground No. 7 The ground No. 7 relates to addition of Rs.19,000/ ,000/- in respect of rental income. The assessee declared the receipt from the rental of rental income. The assessee declared the receipt from the rental of rental income. The assessee declared the receipt from the rental income following the cash accounting system and the amount of income following the cash accounting system and the amount of income following the cash accounting system and the amount of Rs.19,000/-, though pertaining to rental income for the year, it was , though pertaining to rental income for the year, it was , though pertaining to rental income for the year, it was received in subsequent year, so it subsequent year, so it was declared in the subsequent was declared in the subsequent year as income under the head of ‘income form house property’ as income under the head of ‘income form house property’ as income under the head of ‘income form house property’. While declaring the income under the head ‘income from house While declaring the income under the head ‘income from house While declaring the income under the head ‘income from house property’ the assessee is required to declare the income received or property’ the assessee is required to declare the income received or property’ the assessee is required to declare the income received or receivable in respect of property le in respect of property. The option of following ‘Cash’ or . The option of following ‘Cash’ or ‘Mercantile’ accounting to the assessee is available for declaring ‘Mercantile’ accounting to the assessee is available for declaring ‘Mercantile’ accounting to the assessee is available for declaring income under the head ‘profit and gains of the business or income under the head ‘profit and gains of the business or income under the head ‘profit and gains of the business or profession’ or ‘income from other sources’ only and not for the profession’ or ‘income from other sources’ only and not for the profession’ or ‘income from other sources’ only and not for the purpose of declaring income under the ‘Income form house se of declaring income under the ‘Income form house se of declaring income under the ‘Income form house herefore, the assessee was required to declared the property’. Therefore, the assessee was required to declared the herefore, the assessee was required to declared the in the year under consideration. Accordingly, receipt of Rs.19,000/ ,000/- in the year under consideration. Accordingly, we reject the contention of the assessee that no addition should be we reject the contention of the assessee that no addition should be we reject the contention of the assessee that no addition should be in the subsequent year. made as that income was that income was declared in the subsequent year. However, if the assessee accepted this finding, then if the assessee accepted this finding, then if the assessee accepted this finding, then the assessee of income under house property in the may file for rectification rectification of income under house property

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 23 Ltd., 5092 , 5092 & 4918/MUM/2024 subsequent year. The ground No. 7 of the appeal is accordingly The ground No. 7 of the appeal is accordingly The ground No. 7 of the appeal is accordingly rejected.

8.2 The ground No. 8 relates to society charge and property tax The ground No. 8 relates to society charge and property tax The ground No. 8 relates to society charge and property tax paid by the assessee at office premises Mumbai and Delhi. The ld paid by the assessee at office premises Mumbai and Delhi. paid by the assessee at office premises Mumbai and Delhi. AO disallowed Rs. 31,105(= Rs. 1,94,825 AO disallowed Rs. 31,105(= Rs. 1,94,825- Rs. 1,63,710) being Rs. 1,63,710) being excess property tax deduction claimed in respect of ‘Nariman Point operty tax deduction claimed in respect of ‘Nariman Point operty tax deduction claimed in respect of ‘Nariman Point office’. Further, the AO disallowed entire claim of Ts. 72,749/- in office’. Further, the AO disallowed entire claim of Ts. 72,749/ office’. Further, the AO disallowed entire claim of Ts. 72,749/ respect of property tax for ‘Delhi office’ as against claim of the respect of property tax for ‘Delhi office’ as against claim of the respect of property tax for ‘Delhi office’ as against claim of the assessee that property tax bill of Rs. 70,557/ assessee that property tax bill of Rs. 70,557/- was presented d was presented during assessment proceedings. Before the ld CIT(A) the assessee claimed assessment proceedings. Before the ld CIT(A) the assessee claimed assessment proceedings. Before the ld CIT(A) the assessee claimed that amount of Rs. 31,105/ that amount of Rs. 31,105/- was actually society charges in was actually society charges in respect of but inadvertently claimed as claimed as property tax. The Ld. CIT(A) The Ld. CIT(A) in para 6.34 of impugned order 6.34 of impugned order has recorded that the assessee failed to file sessee failed to file evidence in support of its claim in support of its claim.

8.3 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. relevant material on record. Both the lower authorities authorities have recorded that such bills recorded that such bills of society charges and receipt have not and receipt have not been produced before them. Before us also no such evidences have before them. Before us also no such evidences have before them. Before us also no such evidences have been filed. Therefore herefore, we feel it appropriate to restore this issue we feel it appropriate to restore this issue back to the file of the Assessing Officer with the direction to the back to the file of the Assessing Officer with the direction to the back to the file of the Assessing Officer with the direction to the assessee to file copies of assessee to file copies of bills / receipts for the exact amo the exact amount for which deduction has been claimed f ich deduction has been claimed for verification by the Assessing by the Assessing

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 24 Ltd., 5092 , 5092 & 4918/MUM/2024 Officer. The ground No. 8 of the appeal he ground No. 8 of the appeal is according allowed for according allowed for statistical purposes.

“6.36 In the P&L A/c. the appellant has claimed expenses of 6.36 In the P&L A/c. the appellant has claimed expenses of 6.36 In the P&L A/c. the appellant has claimed expenses of Rs.9,90,222/- under the head 'Trade Expenses'. under the head 'Trade Expenses'. 6.37 On perusal of the same, it is seen that one invoice issued by 6.37 On perusal of the same, it is seen that one invoice issued by 6.37 On perusal of the same, it is seen that one invoice issued by Tanisha pertains to purchase of One Gold Bangle worth Rs.84, 166/ Tanisha pertains to purchase of One Gold Bangle worth Rs.84, 166/ Tanisha pertains to purchase of One Gold Bangle worth Rs.84, 166/- . Further the appellant had furnished bills to the extent of . Further the appellant had furnished bills to the extent of . Further the appellant had furnished bills to the extent of Rs.8,99,143/- out of the expenditure of Rs.9,66,717l out of the expenditure of Rs.9,66,717l-. 6.38 The appellant contested that "Gold Bangle purchased from 6.38 The appellant contested that "Gold Bangle purchased from 6.38 The appellant contested that "Gold Bangle purchased from Tanishq was given as a gift to the wife of foreign principal who given as a gift to the wife of foreign principal who given as a gift to the wife of foreign principal who visited out Delhi Office for business meet regarding chartering visited out Delhi Office for business meet regarding chartering visited out Delhi Office for business meet regarding chartering business" 6.39 Further the appellant has also submitted another 2 bills 6.39 Further the appellant has also submitted another 2 bills 6.39 Further the appellant has also submitted another 2 bills amounting to Rs.67,574/ amounting to Rs.67,574/- in respect of purchase of mobile phones. in respect of purchase of mobile phones. But on perusal of the bills for the purchase of mobiles, it is seen that But on perusal of the bills for the purchase of mobiles, it is seen that But on perusal of the bills for the purchase of mobiles, it is seen that one of the bill amounting to Rs.33,000/ one of the bill amounting to Rs.33,000/- was issued on 07/04/2015, was issued on 07/04/2015, a good 7 months prior to Diwali in the year 2015. a good 7 months prior to Diwali in the year 2015. 6.40 The contention of the appellant are considered but not found 6.40 The contention of the appellant are considered but not found 6.40 The contention of the appellant are considered but not found to be acceptable. The appellant has not provided any explanation towards nature of The appellant has not provided any explanation towards nature of The appellant has not provided any explanation towards nature of these expenses. In case of business promotion expense, it is these expenses. In case of business promotion expense, it is these expenses. In case of business promotion expense, it is pertinent to note that it is a very wide terminology being used in pertinent to note that it is a very wide terminology being used in pertinent to note that it is a very wide terminology being used in common parlance and it could comprise of vari common parlance and it could comprise of varieties of expenses. eties of expenses. Having regard to the nature of expenses it is imperative to provide Having regard to the nature of expenses it is imperative to provide Having regard to the nature of expenses it is imperative to provide the explanation by the appellant that why such expenses are the explanation by the appellant that why such expenses are the explanation by the appellant that why such expenses are incurred. The appellant has also not filed the details of the person to incurred. The appellant has also not filed the details of the person to incurred. The appellant has also not filed the details of the person to Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 25 Ltd., 5092 , 5092 & 4918/MUM/2024 whom search expensive items are distr whom search expensive items are distributed and how they are ibuted and how they are associated with the business of the appellant. associated with the business of the appellant. 6.41 In view of the above, I am of the considerate opinion that the 6.41 In view of the above, I am of the considerate opinion that the 6.41 In view of the above, I am of the considerate opinion that the appellant has not provided proper justification for incurring the appellant has not provided proper justification for incurring the appellant has not provided proper justification for incurring the underlined expenses and the expenses are not suppor underlined expenses and the expenses are not suppor underlined expenses and the expenses are not supported by appropriate documentary evidences. Further, the appellant has not appropriate documentary evidences. Further, the appellant has not appropriate documentary evidences. Further, the appellant has not proved that how underlined expenses have nexus with the business proved that how underlined expenses have nexus with the business proved that how underlined expenses have nexus with the business carried out by the appellant. The appellant has failed grossly to carried out by the appellant. The appellant has failed grossly to carried out by the appellant. The appellant has failed grossly to discharge its primary owners to prove genuineness of discharge its primary owners to prove genuineness of expenses incurred and has also failed to establish the admissibility of said incurred and has also failed to establish the admissibility of said incurred and has also failed to establish the admissibility of said expenses as business expenditure. Therefore, the addition made by expenses as business expenditure. Therefore, the addition made by expenses as business expenditure. Therefore, the addition made by Ld. AO is found to be correct and the same is liable to be upheld. Ld. AO is found to be correct and the same is liable to be upheld. Ld. AO is found to be correct and the same is liable to be upheld. 6.42 Accordingly, Ground 7 of the appeal is d 6.42 Accordingly, Ground 7 of the appeal is disposed on merits and isposed on merits and based on information/documents available on records. based on information/documents available on records.” 9.1 We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant material on record. material on record. The lower authorities specifically The lower authorities specifically asked the assessee to provide detail of persons asked the assessee to provide detail of persons to expensive items to expensive items were distributed , but t were distributed , but the assessee did not disclose the name of the he assessee did not disclose the name of the party to whom gold bangle and the mobile phones were allegedly party to whom gold bangle and the mobile phones were party to whom gold bangle and the mobile phones were distributed by the assessee and whether same were customer of by the assessee and whether same were customer of by the assessee and whether same were customer of the assessee. If the assessee succeeds, in . If the assessee succeeds, in establish establishing that same the persons to whom those items were distributed are customer of the persons to whom those items were distributed are the persons to whom those items were distributed are the assessee then same can be treated as part of the business the assessee then same can be treated as part of the business the assessee then same can be treated as part of the business promotion expenses but unless the assessee gives name and promotion expenses but unless the assessee gives name and promotion expenses but unless the assessee gives name and address of those persons address of those persons subject to verification by the AO, n by the AO, same cannot be accepted cannot be accepted as incurred for the business purposes incurred for the business purposes merely on a statement by the assessee on a statement by the assessee. Accordingly, we feel it appropriate . Accordingly, we feel it appropriate to restore this issue also back to the file of the Assessing Officer to restore this issue also back to the file of the Assessing Officer to restore this issue also back to the file of the Assessing Officer with the direction to assessee to pro with the direction to assessee to provide complete name and vide complete name and Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 26 Ltd., 5092 , 5092 & 4918/MUM/2024 address and PAN numbers of the persons to wh address and PAN numbers of the persons to whom such gifts had om such gifts had been distributed.

by the assessee are reproduced 18. The grounds raised by the assessee are reproduced 18. The grounds raised by the assessee are reproduced as under:

1. The CIT(A) 1. The CIT(A) erred in not upholding the appellant's claim for erred in not upholding the appellant's claim for depreciation on the office premises at Andheri to the extent the depreciation on the office premises at Andheri to the extent the depreciation on the office premises at Andheri to the extent the premises were used for the purposes of the appellant's business. The premises were used for the purposes of the appellant's business. The premises were used for the purposes of the appellant's business. The CIT(A) further erred in not appreciating that once the asset has entered CIT(A) further erred in not appreciating that once the asset has entered CIT(A) further erred in not appreciating that once the asset has entered the block of assets on which depreciation has been allowed in the first the block of assets on which depreciation has been allowed in the first the block of assets on which depreciation has been allowed in the first year, depreciation cannot be denied in the subsequent years. year, depreciation cannot be denied in the subsequent years. year, depreciation cannot be denied in the subsequent years.

2. The CIT(A) erred in not deleting the disallowance made by the AO of 2. The CIT(A) erred in not deleting the disallowance made by the AO of 2. The CIT(A) erred in not deleting the disallowance made by the AO of society charges of Rs. 2,20,208 and office furniture society charges of Rs. 2,20,208 and office furniture expenses of Rs. expenses of Rs. 2,947 incurred by the Appellant in respect of its Andheri office 2,947 incurred by the Appellant in respect of its Andheri office 2,947 incurred by the Appellant in respect of its Andheri office premises though the said office premises were used by the Appellant premises though the said office premises were used by the Appellant premises though the said office premises were used by the Appellant for the purpose of its business. for the purpose of its business.

3. The CIT(A) erred in upholding the addition of deemed notional rental 3. The CIT(A) erred in upholding the addition of deemed notional rental 3. The CIT(A) erred in upholding the addition of deemed notional rental income of Rs. 26,94,240 made by the AO in respect of 60 percent of ncome of Rs. 26,94,240 made by the AO in respect of 60 percent of ncome of Rs. 26,94,240 made by the AO in respect of 60 percent of the Andheri office premises without appreciating that the said the Andheri office premises without appreciating that the said the Andheri office premises without appreciating that the said premises were used by the Appellant for the purposes of its business. premises were used by the Appellant for the purposes of its business. premises were used by the Appellant for the purposes of its business. 4. The CIT(A) erred in upholding the disallowance of busi 4. The CIT(A) erred in upholding the disallowance of business meeting ness meeting expenses of Rs. 6,93,164 and Diwali and New year expenses of expenses of Rs. 6,93,164 and Diwali and New year expenses of expenses of Rs. 6,93,164 and Diwali and New year expenses of Rs.10,38,490 incurred by the Appellant for the purposes of its Rs.10,38,490 incurred by the Appellant for the purposes of its Rs.10,38,490 incurred by the Appellant for the purposes of its business. 11. The ground No. 1 raised in the present appeal is identical to The ground No. 1 raised in the present appeal is identical to The ground No. 1 raised in the present appeal is identical to ground No. 5 of the appeal of the assessee ground No. 5 of the appeal of the assessee for assessment year for assessment year 2016-17. Accordingly, the issue in dispute is decided mutatis 17. Accordingly, the issue in dispute is decided mutatis 17. Accordingly, the issue in dispute is decided mutatis mutandis. The ground mutandis. The ground No. 1 is accordingly allowed for statistical allowed for statistical purposes. The ground No. 2 of the appeal is identical to ground No. purposes. The ground No. 2 of the appeal is identical to ground No. purposes. The ground No. 2 of the appeal is identical to ground No. 8 of the appeal of the assessee for asse 8 of the appeal of the assessee for assessment year 2016 ssment year 2016-17 and therefore, same is also adjudicated mutatis mutandis and allowed therefore, same is also adjudicated mutatis mutandis and allowed therefore, same is also adjudicated mutatis mutandis and allowed

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 27 Ltd., 5092 , 5092 & 4918/MUM/2024 for statistical purposes. The ground No. 3 of the appeal of the for statistical purposes. The ground No. 3 of the appeal of the for statistical purposes. The ground No. 3 of the appeal of the assessee is identical to ground No. 6 of the appeal for assessment assessee is identical to ground No. 6 of the appeal for assessment assessee is identical to ground No. 6 of the appeal for assessment year 2016-17 and therefore, same is 17 and therefore, same is decided mutatis mutandis and decided mutatis mutandis and allowed for statistical purposes. The ground No. 4 of the appeal of allowed for statistical purposes. The ground No. 4 of the appeal of allowed for statistical purposes. The ground No. 4 of the appeal of the assessee is identical to ground No. 9 of the appeal of the the assessee is identical to ground No. 9 of the appeal of the the assessee is identical to ground No. 9 of the appeal of the assessee for assessment year 2016 assessee for assessment year 2016-17 and therefore, same is 17 and therefore, same is decided mutatis mutandis and allowed decided mutatis mutandis and allowed for statistical purposes. for statistical purposes.

by the Revenue are reproduced 18. The grounds raised by the Revenue are reproduced 18. The grounds raised by the Revenue are reproduced as under:

1. Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is righ law, the Ld.CIT(A) is right in deleting the addition made on the issue of t in deleting the addition made on the issue of incentive payment to the director to the extend incentive payment to the director to the extend Rs.2,27,48,292/ Rs.2,27,48,292/- without considering the fact that the subject law without considering the fact that the subject law payment is more than payment is more than 5% of the net profit of the company which contravens the provisions of 5% of the net profit of the company which contravens the provisions of 5% of the net profit of the company which contravens the provisions of Section 40A(2/b) of the i. T. Act, 1961C/T(A) r.w.s. 194(1) of the ection 40A(2/b) of the i. T. Act, 1961C/T(A) r.w.s. 194(1) of the ection 40A(2/b) of the i. T. Act, 1961C/T(A) r.w.s. 194(1) of the Company's Act, 2013. Company's Act, 2013.

2. Whether on the facts and in the circumstances of the case and in 2. Whether on the facts and in the circumstances of the case and in 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in deleting the addition made of Rs. law, the Ld. CIT(A) is right in deleting the addition made of Rs. law, the Ld. CIT(A) is right in deleting the addition made of Rs. 28,53,602/-as incentive to three as incentive to three persons without considering the fact persons without considering the fact that the subject payment of incentive is not governed by any that the subject payment of incentive is not governed by any that the subject payment of incentive is not governed by any agreement. 12.1 The issue in dispute raised in ground No The issue in dispute raised in ground Nos. 1 of the appeal . 1 of the appeal relate to salary/incentive payments to related person which has to salary/incentive payments to related person which has to salary/incentive payments to related person which has been disallowed by been disallowed by the Assessing Officer holding to be excessive the Assessing Officer holding to be excessive then the market value then the market value, whereas the Ld. CIT(A) has deleted observing whereas the Ld. CIT(A) has deleted observing as under:

“6.25 The contention of the appellant is found to be acceptable. The 6.25 The contention of the appellant is found to be acceptable. The 6.25 The contention of the appellant is found to be acceptable. The amount paid by the appellant constitutes income for the recipie amount paid by the appellant constitutes income for the recipie amount paid by the appellant constitutes income for the recipient and Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 28 Ltd., 5092 , 5092 & 4918/MUM/2024 the recipient is also taxable at same rate that of appellant company. the recipient is also taxable at same rate that of appellant company. the recipient is also taxable at same rate that of appellant company. There is no revenue leakage which is observed. It is also found that There is no revenue leakage which is observed. It is also found that There is no revenue leakage which is observed. It is also found that the Ld.AO has not provided any adverse comment on the contractual the Ld.AO has not provided any adverse comment on the contractual the Ld.AO has not provided any adverse comment on the contractual arrangement between the appellant and its em arrangement between the appellant and its employee. Its also the ployee. Its also the settled position that the assessing officer cannot step into the shoes of settled position that the assessing officer cannot step into the shoes of settled position that the assessing officer cannot step into the shoes of businessman and take calls at business arrangements. businessman and take calls at business arrangements.” 12.2 Similarly, regarding Similarly, regarding disallowance of salary/incentive to disallowance of salary/incentive to persons other than relative amounting to persons other than relative amounting to Rs.28,53,602/ 28,53,602/- has been deleted by the ld CIT(A), by the ld CIT(A), observing as under:

“6.30 The contention of the appellant is considered and found to be 6.30 The contention of the appellant is considered and found to be 6.30 The contention of the appellant is considered and found to be acceptable. The underline payments are made to non related party acceptable. The underline payments are made to non related party acceptable. The underline payments are made to non related party and are in the accordance of contractual terms. The Ld.A and are in the accordance of contractual terms. The Ld.AO contested O contested that the appellant has not filed the copy of contract and thus he had that the appellant has not filed the copy of contract and thus he had that the appellant has not filed the copy of contract and thus he had disallowed the payments. disallowed the payments.” 12.3 We have considered the rival submission of the parties and We have considered the rival submission of the parties and We have considered the rival submission of the parties and perused the relevant material on record. perused the relevant material on record. The facts qua the issue in The facts qua the issue in dispute are that the Director Mr Ashok Trehan was paid the Director Mr Ashok Trehan was paid the Director Mr Ashok Trehan was paid remuneration of Rs. 3,14,37,344/ remuneration of Rs. 3,14,37,344/- including incentive of Rs. including incentive of Rs. 2,51,37,912/-. According to the AO salary/ According to the AO salary/incentive incentive to Sh Trehan was excessive as compared to fair market value. The assessee was excessive as compared to fair market value. The assessee was excessive as compared to fair market value. The assessee explained that business of the explained that business of the assessee is of ship chartering and Mr assessee is of ship chartering and Mr Trehan is one of the best chartering broker of the company , Trehan is one of the best chartering broker of the company , Trehan is one of the best chartering broker of the company , working since 1980 and hence was promoted as director w.e.f. working since 1980 and hence was promoted as director w.e.f. working since 1980 and hence was promoted as director w.e.f. 2005. Mr Trehan already paid tax on the salary and incentive. The 2005. Mr Trehan already paid tax on the salary and incentive. The 2005. Mr Trehan already paid tax on the salary and incentive. The AO disallowed the incentive a AO disallowed the incentive amount for the reason that section 197 mount for the reason that section 197 company Act, does not permit incentive more than 5 % of the net company Act, does not permit incentive more than 5 % of the net company Act, does not permit incentive more than 5 % of the net profit, therefore it was excessive and he restricted the incentive to profit, therefore it was excessive and he restricted the incentive to profit, therefore it was excessive and he restricted the incentive to the amount prescribed as per company Act and held the balance the amount prescribed as per company Act and held the balance the amount prescribed as per company Act and held the balance amount of Rs. 2,27,48, amount of Rs. 2,27,48,292/- was disallowed invoking section was disallowed invoking section Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 29 Ltd., 5092 , 5092 & 4918/MUM/2024 40A(2)(b) of the Act. On further appeal ) of the Act. On further appeal, the ld CI(A) deleted the , the ld CI(A) deleted the addition observing as under: addition observing as under:

“6.24 The appellant also submitted the agreement copy 6.24 The appellant also submitted the agreement copy 6.24 The appellant also submitted the agreement copy between Mr Ashok Trahan and the appellant company, which between Mr Ashok Trahan and the appellant company, which between Mr Ashok Trahan and the appellant company, which clearly states that Mr Ashok Trah is entitled to business states that Mr Ashok Trah is entitled to business states that Mr Ashok Trah is entitled to business incentives of 10% on commission eared on vessel chartered. incentives of 10% on commission eared on vessel chartered. incentives of 10% on commission eared on vessel chartered. 6.25 The contention of the appellant is found to be acceptable. 6.25 The contention of the appellant is found to be acceptable. 6.25 The contention of the appellant is found to be acceptable. The amount paid by the appellant constitutes income for the The amount paid by the appellant constitutes income for the The amount paid by the appellant constitutes income for the recipient and the recip recipient and the recipient is also taxable at same rate that of ient is also taxable at same rate that of appellant company. There is no revenue leakage which is appellant company. There is no revenue leakage which is appellant company. There is no revenue leakage which is observed. It is also found that the Ld.AO has not provided any observed. It is also found that the Ld.AO has not provided any observed. It is also found that the Ld.AO has not provided any adverse comment on the contractual arrangement between the adverse comment on the contractual arrangement between the adverse comment on the contractual arrangement between the appellant and its employee. Its also appellant and its employee. Its also the settled position that the settled position that the the the assessing officer cannot step assessing officer cannot assessing officer cannot step into step into into the the the shoes of shoes shoes of of businessman and take calls at business arrangements. businessman and take calls at business arrangements. businessman and take calls at business arrangements. 6.26 In view of thee above I am of the considerate opinion that 6.26 In view of thee above I am of the considerate opinion that 6.26 In view of thee above I am of the considerate opinion that the addition carried out by Ld.AO is excessive and the same the addition carried out by Ld.AO is excessive and the same the addition carried out by Ld.AO is excessive and the same is being deleted. being deleted.” 12.4 We have heard rival submission and perused the relevant We have heard rival submission and perused the relevant We have heard rival submission and perused the relevant material on record. material on record. As far as salary/incentive to the director Sh alary/incentive to the director Sh Ashok Trehan is concerned, the identical issue has been is concerned, the identical issue has been is concerned, the identical issue has been adjudicated in favour of the assessee by the Tribunal in in favour of the assessee by the Tribunal adjudicated in favour of the assessee by the Tribunal 7177/Mum/2017 for assessment year 2014 17 for assessment year 2014-15, w 15, wherein the Tribunal(supra) has followed the decision of the Hon’ble Bombay has followed the decision of the Hon’ble Bombay has followed the decision of the Hon’ble Bombay High Court in the case of Indo South Services Travels Pvt. Ltd. Indo South Services Travels Pvt. Ltd. High Court in the case of (supra). The Hon’ble Bombay High Court in the said decision he The Hon’ble Bombay High Court in the said decision he The Hon’ble Bombay High Court in the said decision held that when the payments in the hand of the director of the assessee that when the payments in the hand of the director of the assessee that when the payments in the hand of the director of the assessee concerned is subjected to same rate of taxation is subjected to same rate of taxation, then there is no tax then there is no tax evasion, hence no disallowance was called for. The relevant finding hence no disallowance was called for. The relevant finding hence no disallowance was called for. The relevant finding of the Tribunal is reproduced as under: of the Tribunal is reproduced as under:

Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 30 Ltd., 5092 , 5092 & 4918/MUM/2024

“19. We note in this case the disallowance was made by the AO note in this case the disallowance was made by the AO note in this case the disallowance was made by the AO on the ground that the commission was excessive and unreasonable by the ground that the commission was excessive and unreasonable by the ground that the commission was excessive and unreasonable by comparing the same to the incentive paid to another director @ 0.1% comparing the same to the incentive paid to another director @ 0.1% comparing the same to the incentive paid to another director @ 0.1% and thus disallowed 8% of the and thus disallowed 8% of the commission paid to Shri Ashok Treha commission paid to Shri Ashok Trehan. We further find that the rate applicable to the assessee and Shri We further find that the rate applicable to the assessee and Shri We further find that the rate applicable to the assessee and Shri Ashok Trehan was same and therefore there is no question of tax Ashok Trehan was same and therefore there is no question of tax Ashok Trehan was same and therefore there is no question of tax evasion. The Ld. CIT(A) has followed the Board's circular No.6P dated evasion. The Ld. CIT(A) has followed the Board's circular No.6P dated evasion. The Ld. CIT(A) has followed the Board's circular No.6P dated 06.07.1968 which 06.07.1968 which clearly stated in para No.74 that the disallowance the disallowance is to be made only where this payment to the related party results in is to be made only where this payment to the related party results in is to be made only where this payment to the related party results in tax evasion but in the present case there is no tax evasion as the rate tax evasion but in the present case there is no tax evasion as the rate tax evasion but in the present case there is no tax evasion as the rate applicable to both the parties is same. The case of the assessee is applicable to both the parties is same. The case of the assessee is applicable to both the parties is same. The case of the assessee is supported by the ratio laid d supported by the ratio laid down in two decisions namely namely - CIT vs. Indo South Services Travel Pvt. Ltd. (supra) and CIT vs. V.S. Dempo & Indo South Services Travel Pvt. Ltd. (supra) and CIT vs. V.S. Dempo & Indo South Services Travel Pvt. Ltd. (supra) and CIT vs. V.S. Dempo & Co. Pvt. Ltd. (supra). Under these facts and circumstances, we are Co. Pvt. Ltd. (supra). Under these facts and circumstances, we are Co. Pvt. Ltd. (supra). Under these facts and circumstances, we are inclined to dismiss ground No.6 & 7 raised by the Revenue by inclined to dismiss ground No.6 & 7 raised by the Revenue by inclined to dismiss ground No.6 & 7 raised by the Revenue by upholding the order upholding the order of Ld. CIT(A).” 12.5 Respectfully, following the finding the Tribunal following the finding the Tribunal following the finding the Tribunal (supra) in assessee’s own case, we do not find any infirmity in the order of the assessee’s own case, we do not find any infirmity in the order of the assessee’s own case, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute. Ld. CIT(A) on the issue in dispute.

12.6 Regarding the disallowance of incentive to non Regarding the disallowance of incentive to non Regarding the disallowance of incentive to non-related person amounting to Rs.28,53,602/ amounting to Rs.28,53,602/- raised in ground no. 2 of the appeal , raised in ground no. 2 of the appeal , the facts qua the issue in dispute are that incentive paid to three the facts qua the issue in dispute are that incentive paid to three the facts qua the issue in dispute are that incentive paid to three employees namely Sh Siddharth Trehan ( Rs. 24,98,190/-) : Sh employees namely Sh Siddharth Trehan ( Rs. 24,98,190/ employees namely Sh Siddharth Trehan ( Rs. 24,98,190/ Vijayan Balkrishan (Rs. 1,77,706/ Vijayan Balkrishan (Rs. 1,77,706/-) and Mr Douglas Naikar (Rs. ) and Mr Douglas Naikar (Rs. 1,77,706/-) was disallowed by the AO for the reason that the ) was disallowed by the AO for the reason that the ) was disallowed by the AO for the reason that the assessee failed to submit agreements made with those employees. assessee failed to submit agreements made with those employees. assessee failed to submit agreements made with those employees. The ld CIT(A) deleted the addition observing that the assessee The ld CIT(A) deleted the addition observing that the assessee The ld CIT(A) deleted the addition observing that the assessee demonstrated that the payments made were as per contractual onstrated that the payments made were as per contractual onstrated that the payments made were as per contractual terms only.

12.7 We have heard rival submission of the parties. The ld CIT(A) We have heard rival submission of the parties. The ld CIT(A) We have heard rival submission of the parties. The ld CIT(A) after appreciation of the evidence filed appreciation of the evidence filed before him before him held that Marshall Produce Brokers Company Pvt. Marshall Produce Brokers Company Pvt. 31 Ltd., 5092 , 5092 & 4918/MUM/2024 payments were made as per the contractual terms between the payments were made as per the contractual terms between payments were made as per the contractual terms between assessee and concerned parties assessee and concerned parties. Before us the Revenue has not Revenue has not been able to point out any discrepancy or evidence of non-rendering been able to point out any discrepancy or evidence of non been able to point out any discrepancy or evidence of non of services by them. In such circumstances, we do not find any services by them. In such circumstances, we do not find any services by them. In such circumstances, we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and infirmity in the order of the Ld. CIT(A) on the issue in di infirmity in the order of the Ld. CIT(A) on the issue in di accordingly, we uphold the same. Both the ground we uphold the same. Both the ground Nos. 1 and 2 of appeal of the Revenue are accordingly dismissed. appeal of the Revenue are accordingly dismissed.