NIRUPA SAHAS KANITKAR,PUNE vs. ADDITIONAL COMMISISONER OF INCOME-TAX,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the assessee against the order of CIT(A)-6, Pune, dated 15-06-2015 for the Assessment Year 2011-12.

“On facts and in law, 1. The Ld.CIT(A) erred in confirming the disallowance of commission of Rs.28,19,137/- which was claimed as a deduction from the profits by the appellant who is a land aggregator. 2. The Ld.CIT(A) failed to appreciate that the appellant has to pay the commission to the local persons who act as intermediaries between the appellant and the farmers for the purposes of getting the land from the farmers and thus, this expenditure is an allowable deduction. 3. The Ld.CIT(A) failed to appreciate that the appellant had given the names of these persons, the details of the lands in relation to which the commission was paid, etc etc. and hence, the commission was an allowable deduction.

aggregator and engaged in securing the land for prospective buyers and

selling the same in the open market. She earns commission as well as

pay the same to the brokers too. In the process, assessee earned

commission of Rs.2,25,41,211/- apart from earning other income.

Further, assessee incurred commission expenditure too amounting to

Rs.34,19,137/-. During the course of assessment proceedings

u/s.143(3) of the Act, the allowability of the said commission expenses

was the subject matter of scrutiny by the AO. Relevant discussion on

this issue is seen in Para No.6 of the assessment order along with its

sub-paras. Location and land-wise incurring of commission payment is

grouped and the sum of Rs.20,63,334/- was paid in respect of the land

at Sate. Rs.6,65,655/- was paid in respect of land at Adhe.

Rs.90,148/- was paid in respect of the land at Nane and Rs.6,00,000/-

was paid in respect of the land at Badhalwadi. Assessee submitted that

the commission was paid to various agents for identifying the

prospective sellers and stakeholders. The payment of commission was

made through banking channels after making TDS as per the rules.

Assessee furnished details and evidences in respect of the payments of

commission to various brokers. Despite the same, the AO proposed to

disallow the same. Assessee submitted that the commission

expenditure is genuine and the same is for the commercial purpose of

the business. Therefore, the entire amount has to be allowed. However,

after considering the assessee’s explanation and on considering the fact

that the assessee did not report earning of any income relating to,

certain lands relying on the principle of matching expenditure to the

income earned, the AO allowed only commission payment of Rs.6 lakhs

and disallowed the balance amount of Rs.28,19,137/-. Relevant lines

are extracted here as under :

“6.3 . . . . . . . . . . . .The matching principle of accounting postulate that only the expenses matching with the revenue are to be charged to the Profit and Loss account. The amount of advances/commission paid for the transactions which have not been materiliazed during the year cannot be matched with the revenue from release of rights in other lands. As such, advances could have been taken to the balance sheet and should have been claimed against the revenue from releasing of rights in land at Sate, Nane and Adhe. In view of the above discussion, the commission paid in respect of land at Sate, Nane and Adhe is disallowed u/s.37 of the I.T. Act, 1961…..”

improve his case despite the written submissions and the arguments

before the First Appellate Authority. Eventually, the CIT(A) dismissed

the appeal of the assessee confirming the addition made by the AO.

CIT(A) relied on the judgment of Jurisdictional High Court in the case of

Umakant B. Agarwal Vs. DCIT 369 ITR 220 (Bom.) for the proposition

that the commission cannot be held to be deductible if no evidence of

services rendered is furnished.

us with the aforesaid grounds.

pages 4 and 5 of the paper book, Ld. Counsel for the assessee

submitted that the assessee incurred sum of Rs.34,19,137/- in respect

of various land brokers. Details of the brokers are furnished in the said

pages. The Gut Numbers of the land which involved the services of the

said brokers are also given. In most of the cases payments are made

through banking channels after making TDS as per the rules. In that

case, the claim of the assessee should be allowed in full. He also

brought our attention to the individual ledger extracts of the individual

brokers and also filed copies of the vouchers signed by the agents

evidencing the proof of receipt of the commission giving particulars of

Gut Numbers in respect of which services were received by the

assessee. Ld. Counsel for the assessee prayed for allowing the entire

claim of commission payment without any disturbance.

to certain entries where TDS was not deducted. However, it is a fact

that AO did not look into the cases where TDS was not deducted before

denying the claim of deduction of commission payment. Otherwise, he

relied on the orders of the AO and the CIT(A).

and the paper book filed before us. The core issue to be decided is the

allowability of commission payment of Rs.28,19,137/-. Invoking the

‘matching principle’ is also relevant. We perused the contents on pages

4 and 5 of the paper book which contained the exhaustive list of

commission recipients from the assessee. We find the documentation is

maintained properly. These documents show the fact of making

commission payment through banking channels and the TDS is

deducted as per the rules in most of the cases. It is an undisputed fact

that assessee earned the commission of Rs.2.25 crores (rounded off)-

page 32 of the paper book and the gross receipts of the assessee is to

the tune of Rs.2.32 crores (rounded off). In our view, CIT(A)’s finding

that the assessee failed to file the particulars of services rendered by the

brokers is unsustainable in view of the fact that the assessee earned

income from land dealings to the tune of Rs.2.25 crores. It is a common

sense to infer that assessee could not have earned the said income

without incurring commission payment of Rs.34,19,137/-. The defects

identified by the Ld. DR for the Revenue are not scanned. In our view,

invoking the matching principle is not appropriate in this line of

business activities of the assessee. Therefore, we are of the opinion that

the grounds raised by the assessee are decided in favour of the assessee

and we hold that commission payment of Rs.34,19,137/- as reasonable

when it comes to the total earning of income of Rs.2.25 crores (rounded

off). Thus, the AO is directed to delete the addition of Rs.28,19,137/- in

the hands of the assessee.

Order pronounced in the open court on this 09th day of May, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 09th May, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. CIT(A)-6, Pune 4. CIT-6, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार स स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune