Conclusion –
As per section 14 (2) it is duty cast upon the AO to examine the claim of assessee having regards the account and only where the AO is not satisfied procedure prescribed u/r 8D can be followed.
The proceeds from Insurance company, in respect of Keyman Policy, will be taxable only on receipt basis.
Facts –
Disallowance of commission expenses –
AO noted that assessee has paid excess commission expenses and disallowed the same u/s 36(1)(ii). AO noted that 15% increase is adequate and remaining amount is held to be unreasonable and accordingly made addition u/s 40A(2)(b). AO contended that the assessee has tried to evade dividend distribution tax u/s 115O by way of giving commission.
Disallowance u/s 14A –
AO noted that assessee had received dividend income and contended disallowance under rule 8D. Assessee submitted that they have already disallowed certain amount u/s 14A. AO held that disallowance u/s 14A has to be mandatorily made under rule 8D.
STCG –
Assessee had earned profit on trading of shares amounting to INR 9,64,305/-
on which STCG was offered to tax. AO observed that the assessee was trading in shares on a regular basis and hence the profit on trading of shares be treated as business income.
