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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Shri Saktijit Dey, & Shri Ashwani Taneja
आदेश / O R D E R Per Ashwani Taneja (Accountant Member):
This appeal has been filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-18, Mumbai {(in short Ld. CIT(A)} dated 04.02.2014 for the assessment year 2006-07, decided against the assessment order passed by the Assessing Officer (in short ‘AO’) u/s 143(3)
2 Xoriant Solutions P. Ltd. r.w.s. 254 of the Act. The revenue has filed following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of brokerage of Rs.10,00,210/- paid to Veldon Realtors only on the basis of documentary evidences in support of the payments made.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in overlooking the fact that the assessee had failed to substantiate that these payments were made in lieu of services actually rendered by the said party, even when the issue was set aside by the ITAT for the very same purpose.
3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the ratio laid down in the cases of Lakshminarayan Madanlal Vs CIT (86 1TR 439) SC and Schneider Electric India Ltd. Vs CIT (304 ITR 360) Del, etc., that neither the agreements nor mere payments of commission through account payee cheques after deduction of TDS can bind the Assessing Officer from enquiry into deductibility of commission u/s. 37(1) of Income-tax Act,1961, when no evidence of any services actually rendered was produced.
4. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the A.O. be restored.
5. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."
During the course of hearing none appeared on behalf of the respondent assessee, and Shri Harshad Vengurlekar
3 Xoriant Solutions P. Ltd. Departmental Representative (DR) relied upon the order of the AO.
In this the brief back ground of the case is that in the original assessment order passed by the AO u/s 143(3), brokerage expenses amounting to Rs.10,00,210/- was disallowed by the AO. The Ld. CIT(A) allowed the appeal of the assessee. Against the order of the Ld CIT(A), the Department has filed appeal before the Hon'ble Tribunal. The Tribunal set aside the issue of disallowance of brokerage expenses to the file of the AO by observing as under:
“There is no reference to any such documentary evidence produced by the assessee before the learned CIT (Appeals) and a perusal of the impugned order of the learned CIT(Appeals) shows that he has allowed the claim of the assessee for brokerage expenses mainly on the ground that the said charges was paid by cheques and tax at source was deducted from such payments. In our opinion, the decision rendered by the learned CIT(Appeal) while giving relief to the assessee on this issue is not well founded as he has overlooked the specific findings recorded by the AO in the assessment order while disallowing the claim of the assessee for brokerage expenses. We, therefore, set aside the impugned order of the learned CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same after ascertaining the exact details which are 4 Xoriant Solutions P. Ltd. relevant for this purpose. Ground No.2 of the revenue's appeal is accordingly treated as allowed for statistical purpose."
As per the directions of the Hon'ble Tribunal, the AO gave opportunity to the assessee to submit its explanation. In response, the assessee submitted its reply, and after considering the same, the AO held that as per the directions of the Hon'ble Tribunal, the assessee failed to discharge onus cast upon it of providing documentary evidences such as lease agreement etc. in support of its claim. Therefore, repeating the findings of the AO as per the original assessment order, he made disallowance of Rs.10,02,210/- and added it back to the taxable income of the assessee.
Being aggrieved the assessee has contested the matter before the Ld. CIT(A) and submitted as under:
“The submissions in respect of the three aforesaid objections raised by the AC are as under:- i) With regard to first objection, the AO has not appreciated the fact that for payment of brokerage nobody enters into agreement with the broker. It is the bill of the broker which is material. Therefore, this objection of the AO is baseless. ii) With regard to second objection of the AO that the name of the broker, M/s. Veldon Realtors is not 5 Xoriant Solutions P. Ltd. mentioned in the agreement with M/s. Hiranandani Builders, it is submitted that it seems A. O. is not aware of the practice and procedure followed in the Real Estate market/Lease market. The job of the broker is to arrange meeting of buyer/seller or lessor/lessee together for deciding mutually further terms of agreement, and if the agreement materializes, for bringing two parties together into contact, he gets his brokerage. In the Real Estate market and also where Leave and License agreements are entered into, name of the broker is never mentioned in the agreement entered into between the two principal parties. Therefore, this objection of the AO is not well founded and to be ignored. iii). With regard to third objection of the AO that the brokerage amount does not match with the one month's rental figure, it is submitted that the AO has misdirected himself in reading relevant clause No.4 on page 4 of the agreement. For the first three months’ period of the agreement from 1.7.2005 to 30.9.2005 rental is a sum of Rs. 36 per sq. ft, of built up area. The total built up area is 25,212 sq.ft. Hence, 25,212 sq.ft. multiplied by 36 works out to Rs.9,07,632 which the broker, M/s. Veldon Relators has charged (Kindly see the enclosed bill). Adding Service tax © 10.2 percent which works out to Rs.92,5781-, the total amount charged by the broker comes to Rs.10,00,210.46. The relevant page 4 of the agreement highlighting per square feet rent for the built
6 Xoriant Solutions P. Ltd. up area is enclosed along with the bill of /V/s. Veldon Relators Therefore, the third objection raised by the AO is also on mere conjectures and surmises and as such the same is to be ignored. In view of the submissions, it is prayed that the brokerage paid amounting to Rs.10,00,210/- to M/s. Veldon Relators to be allowed.”
Keeping in view request of the assessee, Ld. CIT(A) sent these submissions along with evidences filed by the assessee to AO for making examination in the remand proceedings. Subsequently, the AO vide letter dated 07.01.2014 has submitted remand report after examining all the evidences of the assessee, wherein it was suggested by the AO that addition made in the assessment order was correct, and therefore it should be upheld.
The Ld. CIT(A) provided a copy of remand report to the assessee, and in response to which reply was submitted by the assessee. After considering order of the Hon’ble Tribunal in the first round, submissions of the assessee, remand report of the AO and rejoinder of the assessee, Ld. CIT(A) deleted the additions by giving detailed reasoning and findings which are reproduced hereunder for the sake of ready reference:
“From the perusal of the submissions and the remand report of the AO it is observed that the assessee has 7 Xoriant Solutions P. Ltd. submitted copy of lease agreement with Hiranandani Builders, invoice raised by M/s. Veldon Realtors, confirmation from MIs. Veldon Realtors, bank statement of M/s. Veldon Realtors showing transaction with the assessee and copy of income tax return and service tax return filed by M/s. Veldon Realtors. The AO has verified these documents but has not agreed with the argument that in absence of justification for payment of brokerage charges by the representative, mere submission of invoice raised, payment made, credit shown in bank account and TDS effected thereon does not satisfy the specific condition of services having been rendered by M/s. Veldon Realtors. Therefore, he has recommended to confirm the disallowance of brokerage paid of Rs.10,00,210/-. On the other hand the AR of the appellant has submitted that the objection of the AO is baseless that for payment of brokerage nobody enters into Agreement with the broker. Secondly, with regard to the second objection that the name of the broker is not mentioned in the Agreement with M/s. Hiranandani Builders it was submitted that in the real estate market and also where leave and license agreements are entered into, name of the broker is not mentioned in the agreement entered between 2 principal parties. With regard to the third objection, the AR has mentioned that the AO has misdirected himself in reading clause No.4 of the Agreement. The total built up area is 25,212 sq.ft. and 8 Xoriant Solutions P. Ltd. multiplied by 36 works out to Rs.92,5781- total comes to Rs. 1O,00,210.46. Keeping in view these facts and circumstances, it is clear that all documentary evidence were submitted before the AO during the remand proceedings which proves that the brokerage was genuinely paid and declared as income by the broker in its income tax return and service tax return was also filed. From the service tax paid, bank statement, confirmation and invoice and other documentary evidences produced, the genuineness of brokerage paid has been established. Therefore, the argument that the assessee has failed to satisfy the condition of service having been rendered by M/s. Veldon Realtors is not acceptable because nobody will make payment as expenditure without any services as there is no relationship between the assessee and the broker and the transaction was carried out through the broker which is clear from these documents submitted and verified by the AO. This income has duly been reflected in the income tax return by the broker and service tax return has been filed showing the service tax paid, further strengthen the contention of the appellant. Keeping in view the facts and circumstances it is held that the brokerage has actually been paid against services rendered for this transaction. Therefore, the disallowance made by the AO is not sustainable. Hence, deleted.”
9 Xoriant Solutions P. Ltd.
We have gone through the order of Ld. CIT(A) as well as remand report and order of the AO. It is noted from the facts on records as mentioned in the orders of lower authorities that payments of the brokerage charges has been made by the assessee to M/s. Veldon Realtors in view of the services rendered by it for arranging office properties/ guest house from the developer namely M/s. Hiranandani Builders. It is noted, from the evidences submitted by the assessee, that the transactions stands confirmed, payments have been made by the assessee on account of brokerage charges to M/s. Veldon Realtors through account payee cheque which has been duly received by the said agent and has been shown by it in the books of accounts and included in the taxable income of the said agent and also in the services tax return filed by the said agent. Thus, undoubtedly, it can be said the transactions stands duly confirmed and no doubts have been expressed by the AO also in this regard. The only issue that remained to be answered was about details and evidences of rendering of services by the said agent to the assessee. In this regard, the assessee has submitted a copy of invoices from M/s. Veldon Realtors wherein it has been mentioned that the said agent has arranged the property from M/s. Hiranandani Builders on lease. These are primary evidences which are expected to be in the possession of the assessee in the normal course of business, and therefore, these were submitted to the AO. It is also an admitted fact that the assessee has taken
10 Xoriant Solutions P. Ltd. property on lease from the said company. In our considered opinion, with help of these evidences, in the given facts and circumstances of the case, the assessee was able to discharge its primary burden, as was laid upon it under the law. Thereafter, if anything more was required by the AO to substantiate the rendering of services, then it could have been asked by the AO from the assessee. Alternatively, this fact could have been verified directly, either from the agent i.e. M/s. Veldon Realtors and/or M/s. Hiranandani Builders. In our considered view, the assessee has discharged its primary onus as laid under the law upon it to substantiate the claim of expenses made by it, and after submissions of these evidences to AO, the onus shifted on the shoulders of the AO. The AO had ample powers under the law to clarify his doubts by asking any more specific information/documents from the assessee and/or from third parties, directly. But no disallowance can be made merely on the basis of presumption or doubts and without mentioning the particulars of further evidences required. We find that Ld. CIT(A) has rightly allowed the claim of the assessee, and therefore, no interference is called for therein, and therefore, these are upheld. Thus, grounds raised by the revenue are dismissed.
11 Xoriant Solutions P. Ltd. 8. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 6th November, 2015.