Gyan Chand Jain (Decd.) Manish Chand Jain v. CIT

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The Tax PublishersD. B. Income Tax Appeal No. 568 of 2011 2013 TaxPub(DT) 1633 (Raj-HC) : (2013) 354 ITR 0662 Income Tax Act, 1961 --Business expenditureAllowability Brokerage paid to sub-brokers--Assessee del credere selling agent had claimed brokerage payable on the sales effected through sub-brokers. Assessing officer held that assessee did not incur the expenditure, it was nearly claimed but no services were rendered by sub-brokers. *Held :* was justified as it was found that all the three lower authorities came to the conclusion that no services were rendered by the sub-brokers, there was no necessity to engage services of brokers/sub-brokers in the light of the agreement with the principal company, and further not a single penny was paid to the sub-brokers for years together. Income Tax Act, 1961 Section 37 In the Rajasthan High Court, Jaipur Bench Amitava Roy, C. J. & Jainendra Kumar Ranka, J. Gyan Chand Jain (Decd.) Manish Chand Jain v. CIT D.B. Income Tax Appeal No. 568 of 2011 24 January, 2013 Appellant by : Mahendra Gargeiya JUDGMENT *Jainendra Kumar Ranka, J.* This instant appeal under section 260A 1 of the Income Tax Act, 1961, for the assessment year 1998-99 has been preferred by the appellant herein assailing the order dated 20-5-2011, passed by the learned Income Tax Appellate Tribunal, Jaipur Bench, 'B', Jaipur (in short 'the ITAT'), sustaining the disallowance to the extent of Rs. 19,93,474 which was the amount claimed as commission paid/payable to the sub-brokers by the appellant. 2. The brief facts of the case are summarised herein below : The appellant-assessee was a del credere selling agent of M/s. Hind Spinners and M/s. Hind Syntex Ltd., Dewas, pursuant to the agreements for selling of the yarn manufactured by these companies in the territory of District of Bhilwara, Rajasthan, the appellant received commission to the extent of Rs. 45,81,710 and a sum of Rs. 19,93,474 was claimed as brokerage payable on the sale effected through sub-brokers. The appellant accordingly claimed the said amount of Rs. 19,93,474 as had been paid/ payable to various sub-brokers, who acted as sub-brokers, the appellant claimed that they in fact, provided services and were paid accordingly. 3. The learned Deputy Commissioner of Income Tax, Circle, Bhilwara, called for the relevant details from the appellant-assessee and, vide order dated 30-3-2001, disallowed the commission/brokerage claimed by the appellant. The learned assessing officer, during the course of hearing, however, required the appellant to : (i) furnish the details of sales effected through sub-brokers ; (ii) lead evidence to the fact that the sales were made through sub-brokers ; (iii) details of outstanding from the parties to whom sales of yarn were made through sub-brokers ; and (iv) to provide sub-brokers with their books of account and record to verify the genuineness of the brokerage paid to the sub-brokers. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersD. B. Income Tax Appeal No. 568 of 2011
2013 TaxPub(DT) 1633 (Raj-HC) : (2013) 354 ITR 0662

Income Tax Act, 1961

--Business expenditureAllowability Brokerage paid to sub-brokers--Assessee del credere selling agent had claimed brokerage payable on the sales effected through sub-brokers. Assessing officer held that assessee did not incur the expenditure, it was nearly claimed but no services were rendered by sub-brokers. Held : was justified as it was found that all the three lower authorities came to the conclusion that no services were rendered by the sub-brokers, there was no necessity to engage services of brokers/sub-brokers in the light of the agreement with the principal company, and further not a single penny was paid to the sub-brokers for years together.

Income Tax Act, 1961 Section 37

In the Rajasthan High Court, Jaipur Bench

Amitava Roy, C. J. & Jainendra Kumar Ranka, J.

Gyan Chand Jain (Decd.) Manish Chand Jain v. CIT

D.B. Income Tax Appeal No. 568 of 2011

24 January, 2013

Appellant by : Mahendra Gargeiya

JUDGMENT

Jainendra Kumar Ranka, J.

This instant appeal under section 260A 1 of the Income Tax Act, 1961, for the assessment year 1998-99 has been preferred by the appellant herein assailing the order dated 20-5-2011, passed by the learned Income Tax Appellate Tribunal, Jaipur Bench, 'B', Jaipur (in short 'the ITAT'), sustaining the disallowance to the extent of Rs. 19,93,474 which was the amount claimed as commission paid/payable to the sub-brokers by the appellant.

2. The brief facts of the case are summarised herein below :

The appellant-assessee was a del credere selling agent of M/s. Hind Spinners and M/s. Hind Syntex Ltd., Dewas, pursuant to the agreements for selling of the yarn manufactured by these companies in the territory of District of Bhilwara, Rajasthan, the appellant received commission to the extent of Rs. 45,81,710 and a sum of Rs. 19,93,474 was claimed as brokerage payable on the sale effected through sub-brokers. The appellant accordingly claimed the said amount of Rs. 19,93,474 as had been paid/ payable to various sub-brokers, who acted as sub-brokers, the appellant claimed that they in fact, provided services and were paid accordingly.

3. The learned Deputy Commissioner of Income Tax, Circle, Bhilwara, called for the relevant details from the appellant-assessee and, vide order dated 30-3-2001, disallowed the commission/brokerage claimed by the appellant. The learned assessing officer, during the course of hearing, however, required the appellant to :

(i) furnish the details of sales effected through sub-brokers ;

(ii) lead evidence to the fact that the sales were made through sub-brokers ;

(iii) details of outstanding from the parties to whom sales of yarn were made through sub-brokers ; and

(iv) to provide sub-brokers with their books of account and record to verify the genuineness of the brokerage paid to the sub-brokers.