DCIT RG 4(1), MUMBAI V. ACTIVE FINSTOCK P.LTD, MUMBAI

ITA 1087/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70868 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: R C JAIN
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, M UMBAI ! ! ! ! !' !'!' !' . . $%& $%& $%& $%& , ' ' ' ' ( ( ( ( BEFORE SHRI VIJAY PAL RAO, JM, AND SHRI N. K. BILLA IYA, AM /. I.T.A. NO. 1087/MUM/2011 ( ' ) ' ) ' ) ' ) *) *) *) *) / ASSESSMENT YEAR: 2007-08) DY. COMMISSIONER OF INCOME TAX, RANGE-4(1), 6 TH FLOOR, ROAD NO. 640, AAYAKAR BHAWAN MUMBAI -20 ' ' ' ' / VS. M/S. ACTIVE FINSTOCK PRIVATE LIMITED, 1801, P.J. TOWER, MUMBAI STOCK EXCHANGE BLDG., DALAL STREET, FORT, MUMBAI-400 001. + ' /. , /.PAN/GIR NO. AAACA8798G ( +- /APPELLANT ) : ( ./+- / RESPONDENT ) +- 0 / APPELLANT BY : SHRI O.P. SINGH ./+- 1 0 / RESPONDENT BY : SHRI R.C. JAIN ' 1 2' / DATE OF HEARING : 29 .08. 2013 34* 1 2' /DATE OF PRONOUNCEMENT : 29 .08. 2013 5 5 5 5 / O R D E R PER : N.K. BILLAIYA (AM) THIS APPEAL BY THE REVENUE IS PREFERRED AGA INST THE ORDER OF THE CIT(A)-9, MUMBAI, DATED 23.11.2010 PERTAINING TO ASSESSMENT Y EARS 2007-08. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE CI T(A) ERRED IN DELETING THE ADDITION OF BAD DEBTS OF RS. 4,14,544/-. THE ASSES SEE IS IN THE BUSINESS OF SHARE BROKING AND TRADING IN SHARES AND DERIVATIVES. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS. 6,58,968/ -. THE ASSESSEE WAS ASKED TO 2 ITA 1087(AY-2007 TO 2008) DY. CIT V/S ACTIVE FINSTOCK PVT. LTD. EXPLAIN WHY BAD DEBTS OF RS.6,58,968/- SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAINED THAT ALL THE CONDITIONS OF SECTION 36(I) (VII) R.W.S 36(2) OF THE ACT HAVE BEEN COMPLIED WITH, HENCE, THE CLAIM OF BAD DEBTS SHOULD BE ALLOWED. THE AO DISMISSED THE SUBMISSIONS OF THE ASSESSEE. THE AO WAS OF THE FIRM BELIEF THAT THE SHARE IN STOCK BROKER BUYS AND SELLS ON BEHALF OF CLIENT FROM THE STOCK EXCHANGE FOR WHICH IT EARNS BROKERAGE INCOME AROUND 0.25% TO 2% OF PURCHASE/SAL E VALUE. THE ASSESSEE BROKER IS LIABLE TO TAX ON ITS BROKERAGE INCOME. THE VALUE OF PURCHASE OR SALE ON BEHALF OF CLIENT IS NOT CREDITED OR DEBITED TO PROFIT AND LOSS ACCOU NT. ACCORDING TO THE AO THE CLAIM OF BAD DEBTS MADE BY THE ASSESSEE DO NOT FULFILL THE C ONDITIONS OF SECTION 36(2) OF THE ACT AND ACCORDINGLY, DISALLOWED THE BAD DEBTS AND ADDED TO THE RETURN INCOME OF THE ASSESSEE. 4. THE ASSESSEE STRONGLY AGITATED THIS ISSUE BEFORE THE CIT(A), AND STRONGLY CONTENDED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED, IN VIEW OF THE DECISION OF THE BOMBAY TRIBUNAL IN THE CASE OF SHREYAS S. MORAK HIA. 5. AFTER CONSIDERING THE FACTS OF AND THE SUBMISSIO NS OF THE ASSESSEE THE CIT(A) FOLLOWED THE DECISION OF THE MUMBAI BENCH AS WELL A S THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED 230 CTR 14 (SC) AND DELETED THE DISALLOWANCE MADE BY THE AO. 6. THE REVENUE IS BEFORE US AGAINST THIS FINDING OF THE CIT. 7. AT THE VERY OUTSET THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO. 2280/MUM/2010. THE COUNSEL ALSO P OINTED OUT THAT THE ISSUE IS ALSO COVERED BY THE DECISION OF THE HONBLE JURISDICTION AL HIGH COURT OF MUMBAI IN THE CASE OF SHREYAS S. MORAKHIA IN ITA 89/MUM/ 2011. TH E LEARNED DR FAIRLY CONCEDED TO THIS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDER OF THE LOWER AUTHORITIES AND ALSO THE DECISIONS RELIED UPON BY T HE COUNSEL. WE FIND FORCE IN THE 3 ITA 1087(AY-2007 TO 2008) DY. CIT V/S ACTIVE FINSTOCK PVT. LTD. CONTENTION OF THE COUNSEL THAT THE CLAIM OF THE ASS ESSEE IN RESPECT OF BAD DEBTS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 2280/MUM/2010, AND ALSO BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHREYAS MO RAKHIA (SUPRA). RESPECTIVELY FOLLOWING THESE TWO DECISIONS FINDING OF THE CIT(A) ARE CONFIRMED. 6 27 1 '61 2 8% 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 5 1 34* ' 9'7 29.08.2013 4 1 : ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF AUGUST , 2013. SD/- SD/- ( VIJAY PAL RAO ) ( N. K. BILLAIYA ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER MUMBAI: 9' DATED : 29.08.2013 ' . /.PRAMOD KUMAR, PS 5 5 5 5 1 11 1 .2; .2; .2; .2; <*2 <*2 <*2 <*2 / COPY OF THE ORDER FORWARDED TO : 1. +- / THE APPELLANT 2. ./+- / THE RESPONDENT 3. = ) (/ THE CIT(A); 4. = / THE CIT CONCERNED; 5. >: .2' , , / DR, ITAT, MUMBAI; 6. :?) @ / GUARD FILE 5' 5' 5' 5' / BY ORDER, A AA A / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI