ITO 28 (2)(4), MUMBAI vs. SHRI. PRAMOD KUMAR AGARWAL, MUMBAI

The assessee, in his appeal, has challenged the decision of learned Commissioner (Appeals) in partly sustaining the addition of commission income. Whereas, the revenue in its appeal has raised a technical issue regarding violation of Rule 46A of the Income Tax Rules.

Briefly the facts are, the assessee is an individual and earns commission and incentives as a corporate insurance agent. In course of assessment proceedings, the assessing officer, while verifying form 26AS noticed that the assessee has received the following commission income and incentive:- 1. IFFCO Tokio General Insurance Co Ltd (ITGICL) Rs. 1,90,18,280/- 2. United India Insurance Co Ltd (UICL) Rs.1,06,66,015/- Rs.2,96,84,295/-

Noticing that the aforesaid commission income was not offered to tax by the assessee, the assessing officer issued a show cause notice to explain the reason for not offering the income. In response to the show cause notice, the assessee submitted that actually Easylink Insurance Services Pvt Ltd (EISPL), wherein, he is the Managing Director, is the corporate agent of ITGICL in respect of Pravasi Bharatiya Bima Yojna (PBBY) policies. While incentive in respect of the policies is credited to assessee’s individual account, the commission income on 3 ITA 3126/Mum/2019 ITA 3723/Mum/2019 the premium paid is credited to the account of the company, viz. EISPL. It was submitted that the aforesaid method of offering the commission income and incentive is consistently followed over the years. Thus, the assessee submitted that the commission income since has been offered at the hands of the company, it is not taxable again at his hands. The assessing officer, did not find merit in the submissions of the assessee and added back the amount of Rs.2,96,84,295/- to the income of the assessee. Being aggrieved, assessee contested the addition before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals), though, upheld the addition of commission income at the hands of the assessee; however, he allowed deduction for proportionate expenditure and ultimately restricted the addition to Rs.70,29,985/-.

Reiterating the stand taken before the departmental authorities, learned counsel for the assessee submitted, commission income is consistently offered at the hands of EISPL. He submitted, following the same method in the impugned year also, the entire commission income of Rs.2,96,84,295/- has been offered as income in the return of income filed by EISPL for the impugned assessment year. Thus, he submitted, any further addition at the hands of the assessee would amount to double addition of the same income. Further, he submitted, the fact that commission income received from ITGICL and UIICL is consistently taxed at the hands of EISPL, would be evident from the fact that in assessment year 2013- 14, the Tribunal in dated 18-02-2020 has directed the assessing officer to allow TDS credit on the commission income to ESIPL.

We have considered rival submissions and perused materials on record. The dispute lies within a very narrow compass as to whether certain commission income remitted by ITGICL and UIICL is taxable at the hands of the assessee. As could be seen from record, the assessee is the managing director of EISPL. It is the claim of the assessee that EISPL is actually the corporate agent of the insurance companies. From the assessment stage itself it is the stand of the assessee that the entire commission income amounting to Rs.2,96,84,295/- has been offered at the hands of the company, viz. EISPL. It is also the stand of the assessee that commission income is consistently offered at the hands of EISPL. In our view, the order passed by the Tribunal in assessee’s own case for assessment year 2013-14, as mentioned above, supports the aforesaid claim of the assessee. While deciding appeal in assessment year 2013-14 the Tribunal has directed the assessing officer to allow TDS credit relating to such commission income at the hands of the company. In our view, if ESIPL is actually the agent of the insurance companies and the commission income has been offered at the hands of EISPL, there is no reason to tax such income again at the hands of the assessee. Therefore, the assessing officer is directed to factually verify whether the subject commission income has been offered at the hands of EISPL. In case it is found to be so, no 5 ITA 3126/Mum/2019 ITA 3723/Mum/2019 further addition can be made at the hands of the assessee. However, the corresponding TDS credit has to be withdrawn from the assessee.

As regards grounds raised