The Income Tax Appellate Tribunal (ITAT), Bangalore bench has allowed 1% of the sale consideration as brokerage for the sale of the property since the assessee could not prove the evidence for the payment of brokerage for the sale of property to compute the amount of capital gain under the provisions of the Income Tax Act, 1961.
The assessee, Mathew Pradeep Francis is a non-resident and is residing in USA. We notice that, from the beginning, the assessee has been stating that he has paid brokerage of Rs.4,90,000/- calculated @2% of the sale consideration to a person named Shri K.T. Verghese. The mistake, according to AO, is that the assessee has obtained acknowledgement from Shri K.T. Verghese for the payment of brokerage on his letter pad, instead of obtaining a separate receipt from Shri K T Verghese. Further the assessee was not aware of address or whereabouts of Shri K.T. Verghese, making it impossible to cross verify the claim of payment of brokerage.
The Tribunal bench comprising Shri N.V. Vasudevan, Vice President and Shri B.R. Baskaran, Accountant Member has found that the assessee could not prove the payment of brokerage with concrete evidences.
While partly allowing the commission expenses, the Tribunal held that “It is a common practice to pay brokerage while purchase or selling the properties. Since the assessee is in USA, it is quite possible that he would have paid brokerage to the broker who introduced the buyer. Hence, the payment of brokerage by the assessee cannot be discounted altogether and in our view, in the facts of the present case, in the absence of concrete evidences, the genuineness of the payment may be determined on the basis of circumstantial evidences, which are acknowledgement given on the letter pad of the assessee and the bank entries. Since these are incomplete documents, it is not clear as to whether the entire amount of Rs.4,90,000/- represented only brokerage amount or not. Accordingly, in the absence of proper evidences, we are of the view that the entire claim of brokerage of Rs.4,90,000/- may not be allowed. Accordingly, we restrict the brokerage payment to the extent of 1% of the sale consideration may be allowed and direct the AO to allow brokerage expenses to the extent of Rs.2,45,000/- as against the claim of Rs.4,90,000/-. Accordingly, we set aside the order of Ld. CIT(A) passed on this issue and direct the A.O. to allow brokerage expenses to the tune of Rs.2,45,000/-.”
Smt. Sunaina Bhatia appeared for the assessee.
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