The ACIT, Circle-3, Ahmedabad V. Kunvarji Finstock Pvt.Ltd., Ahmedabad

ITA 1696/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9773 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: IRA R KAPOOR
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE ACIT, CIRCLE - 3, B - 109, 1 ST FLOOR, PRATYAKSH KAR BHAVAN, PANJRAPOLE, AMBAWADI, AHMEDABAD - 380015 (APPELLANT) VS KUNVARJI FINSTOCK PVT. LTD, 409, SHYAMAK COMPLEX, BEHIND KAMDHENU COMPLEX, AMBAWADI, AHMEDABABD - 38001 PAN: AAACK87 60E (RESPONDENT) REVENUE BY : S H RI DINESH SINGH , SR. D . R. ASSESSEE BY: MS. IRA R. KAPOOR , A.R. DATE OF HEARING : 29 - 01 - 2 01 6 DATE OF PRONOUNCEMENT : 29 - 01 - 2 016 / ORDER P ER BENCH : - THI S REVENUE S APPEAL FOR A.Y. 2009 - 10 , AR ISES FROM ORDER OF THE CIT(A) - 6, AHMEDABAD DATED 11 - 06 - 2012 IN APPEAL NO. CIT(A) - VI/ACIT.CIR.3/186/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE AC T . I T A NO . 1696 / A HD/20 12 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 1696 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. KUNVARJI PVT. LTD 2 2. THE REVENUE S SOLE SUBSTANTIVE GROUND CHALLENGES THE LOWER APPELLATE ORDER DELETING BAD DEBT DISALLOWANCE OF RS. 40,04,986/ - MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 23 - 12 - 2011 ALLEGING VIOLATION OF THE NECESSARY CONDITIONS ENVISAGES U/S. 36(2) OF THE ACT. 3. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSEE COMPANY IS ENGAGED IN SHARE TRADING, BROKERAGE IN SHARES, MUTUAL FUNDS AND IPO. IT CLAIMED THE IMPUGNED BAD DEBTS DEDUCTION. THE ASSESSING OFFICER DISALLOWED THE SAME BY INTER ALIA OBSERVING THAT ITS BROKERAGE BUSINESS WAS DIFFERENT THAN A GENERAL TRADING IN ONE MATERIAL ASPECT THAT THE LATTER ONE INVOLVED PURCHASE AS AGAINST THE FORMER. |HE WAS OF THE VIEW THAT A STOCK BROKER ACTS AS AN AGENT FOR SELL/PURCHASE OF SHAR ES AT ITS CLIENTS BEHEST AND MAKES PAYMENTS ON THEIR BEHALF. HE OPINED THAT THIS EXERCISE RESULTED IN BROKERAGE INCOME AS RECORDED IN BOOKS OF ACCOUNT. THE ASSESSING OFFICER THEREAFTER THE NECESSARY CONDITION U/S. 36(2) THAT THE AMOUNT CLAIMED AS BAD DE BT HAS TO BE ACCOUNTED AS INCOME IN ANY PREVIOUS YEAR. HE CONSIDERED ALL THESE FACTS AND CIRCUMSTANCES TO OBSERVE THAT THE EXCESSIVE OF BROKER DUE IN THE INSTANT CASE WAS IN THE NATURE OF TEMPORARY LOAN NOT RECOVERED FROM ITS CLIENTS AND SINCE IT WAS NOT ENGAGED IN BANKING OR MONEY LENDING BUSINESS, THE SAME COULD NOT BE ALLOWED AS BAD DEBTS. AND ALSO THAT THE VERY SUM HAD NOT BEEN RECORDED AS INCOME OF ANY PREVIOUS YEAR. ALL THIS DISCUSSION LED TO THE IMPUGNED BAD DEBT DISALLOWANCE OF RS. 40,04,986/ - . I.T.A NO. 1696 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. KUNVARJI PVT. LTD 3 4. THE CIT(A) REVERSES ASSESSING OFFICER S ACTION BY PLACING RELIANCE ON TRIBUNAL S ORDER IN ASSESSEE S CASE FOR ASSESSMENT YE AR 2004 - 05. THIS LEAVES THE REVENUE AGGRIEVED. 5. WE HAVE HEARD BOTH THE PARTIES. THERE IS NO DISPUTE SO FAR AS THE FACTS O F THE CASE ARE CONCERNED. THE ASSESSING OFFICER INVOKED THE IMPUGNED BAD DEBTS DISALLOWANCE ALLEGING VIOLATION OF SECTION 36(2) OF THE ACT. IT HAS COME ON RECORD THAT ASSESSEE EARNS TRADING AND BROKERAGE INCOME. IT PURCHASES SHARES IN QUESTION ON BEHALF OF ITS CLIENTS FOR BROKERAGE INCOME AFTER MAKING ALL NECESSARY PAYMENT WHICH COULD NOT BE RECOVERED RESULTING IN ITS CLAIM OF BAD DEBTS. THE VERY ISSUE STANDS ADJUDICATED IN ASSESSEE S FAVOUR BY A LD. CO - ORDINATE BENCH IN ORDER DATED 13 - 04 - 2009. A YET A NOTHER CO - ORDINATE BENCH IN ITA 1531/AHD/2001 ACIT VS. ANAGRAM CAPITAL LTD DECIDED ON 06 - 11 - 2015 DECIDES A SIMILAR ISSUE AGAINST THE REVENUE INVOLVING AN IDENTICAL BAD DEBTS CLAIM IN CASE OF A SHARE BROKER BY FOLLOWING TRIBUNAL S SPECIAL BENCH DECISION (20 10) 5 ITR (TRIB) 1 (BOM) DCIT VS. SHREYS S. MORAKHIYA AS UPHELD BY HON BLE BOMBAY HIGH COURT REPORTED AS (2012) 342 ITR 285 (BOM) HOLDING THAT VALUE OF THE SHARES TRANSACTED BY A BROKER ON BEHALF OF ITS CLIENTS IS VERY MUCH ALLOWABLE AS BAD DEBTS. THE REV ENUE FAILS IN TAKING US TO ANY CASE LAW TO THE CONTRARY. THERE IS NO REBUTTAL ON FACTS POINTED OUT. WE TAKE INTO ACCOUNT OUR PRECEDING DISCUSSION AND HOLD THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED BAD DEBTS DISALLOWANCE OF RS. 40,04,986/ - . THE S OLE SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL IS REJECTED . I.T.A NO. 1696 /AHD/20 12 A.Y. 2009 - 10 PAGE NO ACIT VS. KUNVARJI PVT. LTD 4 6. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 29 - 01 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 29 /01/2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,