Case Law Details
Purushottam Sharma Vs DCIT (ITAT Jodhpur)
Introduction: The case of Purushottam Sharma vs. DCIT (ITAT Jodhpur) revolves around a crucial taxation question – whether income from LIC (Life Insurance Corporation) commission should be categorized as income from business or income from other sources. Additionally, the case examines the eligibility of expenses for deduction. This article provides a comprehensive analysis of this case, highlighting the arguments presented and the ultimate conclusion reached by the tribunal.
Detailed Analysis:
1. Nature of Income: The primary issue in this case is the nature of the income earned by the assessee, who is an LIC agent. The Central Processing Centre (CPC) classified it as “commission income” and allowed no further deductions. The question arises whether this income should indeed be categorized as business income or income from other sources.
2. Application under Section 154: The assessee filed an application under Section 154 of the Income Tax Act, 1961, seeking rectification. However, this application was rejected without providing substantial reasons.
3. Consistency in Business Activity: It is essential to note that the assessee had been engaged in a similar business in prior and subsequent years, and this was accepted by the revenue authorities. This consistency raises questions about why the income was categorized differently in this particular assessment year.
4. Deductibility of Expenses: The crux of the matter is whether the assessee is entitled to claim expenses related to earning commission as an LIC agent. The argument here is that the nature of the business implies incurring expenses, and thus, the addition confirmed by the CIT(A) should be reconsidered.
Conclusion: The tribunal, after considering the arguments presented, concluded that the income earned by the assessee, in this case, should indeed be categorized as business income. It found that the CPC had incorrectly classified it as commission income without allowing necessary deductions. As the assessee had a consistent history in a similar business, the tribunal found no reason to treat the income differently in this assessment year. Consequently, the addition of Rs. 2,92,657 was deleted.
In Summary: The Purushottam Sharma vs. DCIT case highlights the importance of correctly categorizing income for taxation purposes and allowing reasonable deductions for expenses incurred in business activities. In this instance, the tribunal ruled in favor of the assessee, recognizing their income from LIC commission as business income and allowing the associated expenses, thus providing clarity on this taxation matter.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
The present appeal and Stay Application has been filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi dated 15.03.2023.
2. Following grounds have been raised by the assessee:
“1. That the Order passed by the A.O as well as sustained by the National Faceless Appeal Centre (NFAC), Delhi is illegal and against the law.
2. That the assessment completed is illegal and against the law.
3. That the rejection of claim u/s 154 is illegal and against the law because in the A.Y. 2018-19, in the same set of circumstances the declared income has been accepted following the 44AD as such same should has been accepted.
4. That the assessing officer imposed double tax on the one income under the head of business income as well as income from other sources, which is illegal and against the law. As such only the income part should be sustained that is amounting to Rs. 66962/-.
5. That the assessee correctly shown its income under the head of business income but the assessing officer treated it as income from other sources. The assessee filed rectification because it is mistake is apparent from the record, hence covered under the definition of mistake as per the section 154 of the Income Tax Act.
6. That the CIT should have accepted the appreciated issued that only profit can be taxed and not the entire income. Under 143(1) inspiration cannot be taken from other section as per judgment of Rajasthan High Court.”
3. Heard the arguments of both the parties and perused the material available on record.
4. We find that the assessee has earned commission being LIC agent of Rs.3,59,619/-. The CPC has wrongly considered this as “commission income and allowed no further deductions. The application u/s 154 of the Income Tax Act, 1961 filed by the assessee has also been rejected without according any tangible reasons. It is an undisputed fact that the assessee is in the similar business in the earlier and subsequent years which has been accepted by the revenue authorities. It cannot be said that the assessee cannot incur any expenses while doing the business of earning commission as an LIC agent and hence, the addition confirmed by the ld. CIT(A) of Rs.2,92,657/- (Rs.3,59,619 – Rs. 66,962) is hereby deleted.
5. Since, the appeal of the assessee has been allowed, the SA becomes infructuous and hence dismissed.
6. In the result, the appeal of the assessee is allowed and the SA of the assessee is dismissed.
Order Pronounced in the Open Court on 19/09/2023.
