M/S. M.R.SHARE BROKING PVT.LTD., MUMBAI V. ACIT 4(3), MUMBAI

CO 31/MUM/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5130 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARESH KUMAR BALODIA
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, H BENCH, MUMBAI. BEFORE SHRI SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) A ND V.DURGA RAO (JUDICIAL MEMBER) C.O.NO.31/MUM/2009 (ARISING OUT OF I.T.A NO.5904/MUM/2008) ASSESSMENT YEAR: 2005-06 M.R.SHARE BROKING PVT. LTD., 285, PRINCESS STREET, C.J.HOUSE, 2 ND FLOOR, MUMBAI-400 002. PA NO.AACCM 9277 C APPELLANT VS THE ACIT 4(3), 6 TH FLOOR, R.NO.649, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. RESPONDENT APPELLANT BY: SHRI NARAYAN ATAL RESPONDENT BY : SHRI NARESH KUMAR BALODIA (DR) O R D E R PER PRAMOD KUMAR: THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS CROSS OBJECTION IS, WHETHER OR NOT, THE CIT (A) WAS JUSTIFIED IN UPHOLD ING THE DISALLOWANCE OF ` 74,519/- AS BAD DEBTS. THE ASSESSMENT YEAR INVOLVED IS 2005-06 AND THE IMPUGNED ASSESSMENT WAS FRAMED U/S.143(3) OF THE I.T.ACT, 1961. 2. TO ADJUDICATE THIS CROSS OBJECTION, IT IS SUFFIC IENT TO TAKE NOTE OF THE FACT THAT THE IMPUGNED DISALLOWANCE WAS MADE ON THE GROUND THAT T HE AMOUNT WRITTEN OFF WAS NOT TAKEN INTO ACCOUNT OF INCOME OF ANY OF THE PREVIOUS YEARS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF STOCK BROKER AND BUYS AND SELLS SHA RES ON BEHALF OF THE CLIENTS. THE IMPUGNED AMOUNTS OF BAD DEBTS WRITTEN OFF PERTAINED TO THE DEBT IN CONNECTION WITH SUCH PURCHASES MADE ON BEHALF OF THE CLIENTS. HOWEVER, AS WE HAVE NOTED ABOVE, THE DISALLOWANCE WAS MADE ON THE GROUND THAT ONLY THE B ROKERAGE INCOME EARNED FROM SUCH TRANSACTION, HAS BEEN TAKEN INTO ACCOUNT AS INCOME OF THE ASSESSEE AND, THEREFORE, THE ENTIRE AMOUNT OF DUES FROM CLIENTS, WHEN WRITTEN OF F, CANNOT BE ALLOWED AS DEDUCTION C.O. NO.31/MUM/2009 M.R.SHARE BROKING 2 U/S.36(2) W.R. 36(1)(VII) OF THE ACT. THE DISALLOW ANCE SO MADE HAS BEEN CONFIRMED BY THE CIT (A). AGGRIEVED BY WHICH, THE ASSESSEE IS I N APPEAL BEFORE US. 3. THE LD COUNSEL FOR THE ASSESSEE FAIRLY AGREED TH AT THE ABOVE ISSUE IS NOW COVERED BY THE DECISION DATED 16 TH JULY, 2010 OF THE ITAT MUMBAI (SB) IN THE CASE OF DCIT V. SHRI SHREYAS S. MORAKHIA ( ITA NO. 3374/MUM/2004( ASSESSMENT YEAR 1998- 99, EVEN THOUGH THE LD D.R. RATHER DUTIFULLY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION DATE D 16 TH JULY, 2010 OF THE ITAT MUMBAI (SB) IN THE CASE OF DCIT V. SHRI SHREYAS S. MORAKHI A (SUPRA). THE SPECIAL BENCH HAS, IN THE SAID CASE, CONCLUDED THAT THE AMOUNT RECEIVA BLE BY THE ASSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIENT, AGAINST THE TRANSACTION FO R PURCHASE OF SHARES, IS A TRADING DEBT. IT IS FURTHER OBSERVED THAT WHEN BROKERAGE OR COMMI SSION ARISING FROM THE SAID TRANSACTION IS TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME, IT CLEARLY SATISFIES THE CONDITIONS STIPULATED SET OUT IN SECTION 36(2)(I). AS THESE CONDITIONS ARE ADMITTEDLY SATISFIED IN THE PRESENT CASE, THE ASSESSEE DOES DE SERVE TO SUCCEED IN THE CLAIM FOR BAD DEBTS. THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE SPECIAL BENCH (SUPRA), WE DELETE THE IMPUGNED DISALLOWANCE AND ALLOW THE CROS S OBJECTION OF THE ASSESSEE. 5. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSE SSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2010 SD/- (V. DURGA RAO) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 22 ND SEPTEMBER, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-XV, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-4, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH H, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI C.O. NO.31/MUM/2009 M.R.SHARE BROKING 3 DATE INITIALS 1. DRAFT DICTATED ON 15.9.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 15.9.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER C.O. NO.31/MUM/2009 M.R.SHARE BROKING 4