BHH SECURITIES P. LTD, MUMBAI V. ASST CIT 4(1), MUMBAI

ITA 1932/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83468 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAVA
• Assessee Lawyers: MAYUR R MAKADIA
• Keywords: Bad and doubtful debts; Deemed dividend
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.1932/MUM/2012, A.Y. 2008-09 M/S. BHH SECURITIES PVT. LTD., 634, ROTUNDA BLOCK, THE STOCK EXCHANGE, B.S.MARG, FORT, MUMBAI 400 023. PAN: AAACB 6931H (APPELLANT ) VS. ASSTT. COMMISSIONER OF INCOME- TAX 4 (1), MUMBAI. (RESPONDENT) APPELLANT BY : SHRI MAYUR R. MAKADIA RESPONDENT BY : SHRI AN URAG SRIVASTAVA DATE OF HEARING : 05/08/2014 DATE OF PRONOUNCEMENT : 05 /08/2014 ORDER PER I.P.BANSAL, J.M, THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-8, MUMBAI DATED 12/01/2012 FOR THE ASSESSMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: 1. DISALLOWANCE OF BAD DEBTS - RS. 15,30,173 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN GRANTING ONLY A PARTIAL RELIEF OF RS.19,81 ,896/- IN RESPECT OF THE APPELLANTS CLAIM OF BAD DEBTS OF RS. 35,12,069/- ON THE BASIS OF THE ARBITRATION AWARD DT. 5TH JUNE 2000. 1.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) FAILED TO APPRECIATE THAT INSPITE OF THE ARBITRATIO N AWARD DT. 5TH JUNE 2000 DIRECTING THE DEBTOR TO SETTLE THE APPELLANTS CLAIM TO THE E XTENT OF RS. 19,81,896/-, THE SAID DEBTOR FAILED TO PAY A SINGLE RUPEE TO THE APPELLAN T AND THEREFORE THE APPELLANT HAD NO CHOICE BUT TO WRITE OFF THE SAME IN ITS BOOKS OF ACCOUNTS. ITA NO.1932/MUM/2012, A.Y. 2008-09 2 1.3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) FAILED TO APPRECIATE THAT SUBSEQUENT TO THE AMENDME NT MADE TO SECTION 36 (1) (VII), THE APPELLANT IS NO LONGER REQUIRED TO ESTABLISH TH AT THE DEBT HAS BECOME BAD IN ORDER TO CLAIM SUCH A WRITE OFF. 2. DISALLOWANCE U/S 14A - RS. 25,072/- 2.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE DISALLOWING OF RS.25,072/- U/S. 14A R.W.R. 8D OF THE INCOME TAX RULES WHICH WAS OVER AND ABOVE RS. 23,288/- VOL UNTARILY DISALLOWED BY THE APPELLANT. I 2.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ) ERRED IN NOT EXCLUDING THE VALUE OF BSE MEMBERSHIP CARD FROM INVESTMENTS FOR THE PURPOSE OF CALCULATION OF DISALLOWANCE U/S 14A R.W. R. 8D. 3. DISALLOWANCE OF TRANSACTION CHARGES - RS. 2,54,0 31/- 3.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEAL) ERRED IN CONFIRMING THE DISALLOWING OF RS. 2,54,031 /- U/S 40 (A) (IA) ON ACCOUNT OF NON DEDUCTION OF TDS ON TRANSACTION CHARGES AS REQU IRED U/S 194J OF THE INCOME TAX ACT. 3.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) FAILED TO APPRECIATE THAT THE TRANSACTION CHARGES A RE LEVIED FOR UTILIZING THE TRADING PLATFORM OF THE STOCK EXCHANGE FOR PURCHASE AND SAL E OF SHARES AND SECURITIES ON BEHALF OF THE CLIENTS AND NOT FOR ANY TECHNICAL SER VICES PROVIDED BY THE EXCHANGE AND THEREFORE SUCH PAYMENTS ARE OUTSIDE THE AMBIT O F SECTION 194J. 4. DEEMED DIVIDEND U/S 2 (22) (E) 4.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT (APPEAL) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 2 (22) (E) A RE ATTRACTED IN RESPECT OF AMOUNTS DUE BY THE SHAREHOLDERS TO THE APPELLANT COMPANY IN RESPECT OF TRADING TRANSACTIONS. 4.2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT (APPEAL) FAILED TO APPRECIATE THAT THE AMOUNT DUE BY THE SHAREHOLDERS TO THE APPELLANT COMPANY ON ACCOUNT OF TRADING TRANSACTIONS CANNOT BE CONSIDERE D AS A LOAN OR AN ADVANCE WITHIN THE MEANING OF SECTION 2 (22) (E). 4.3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT (APPEAL) FAILED TO APPRECIATE THAT THE APPELLANT COMPANY WAS ALSO LIAB LE TO PAY CERTAIN AMOUNTS TO THESE SHAREHOLDERS AND THEREFORE EVEN IF THE PROVIS IONS OF SECTION 2 (22) (E) ARE ATTRACTED, THE SAME SHOULD BE ONLY IN RESPECT OF TH E NET BALANCES DUE TO THE APPELLANT COMPANY. ITA NO.1932/MUM/2012, A.Y. 2008-09 3 2. GROUND NO.2 WAS NOT PRESSED DUE TO SMALLNESS OF THE AMOUNT, HENCE, DISMISSED BEING NOT PRESSED. GROUND NO.4 WAS ALSO NOT PRESSED, THEREFORE, THE SAME IS ALSO DISMISSED BEING NOT PRESSED. 3. GROUND NO.1 RELATES TO AN ISSUE REGARDING ALLOWA BILITY OF BAD DEBT. THE ASSESSEE IS A BROKER IN SHARES. IT WAS WORKING AS BROKER FOR VIMAL FINANCIAL CONSULTANTS BY BUYING AND SELLING VARIOUS SECURIT IES ON ITS BEHALF AND AS PER ITS INSTRUCTIONS. OWING TO LOSSES INCURRED BY THE SA ID CLIENT IT WAS UNABLE TO PAY THE DEBTS DUE TO THE ASSESSEE. THE TOTAL AMOUNT DU E TO THE ASSESSEE AS PER ITS BOOKS OF ACCOUNT FROM THE SAID PARTY WAS AMOUNTING TO RS.35,12,069/-. ACCORDING TO THE RULES AND REGULATIONS OF STOCK EXC HANGE, ON AN APPLICATION FILED BY THE ASSESSEE AN ARBITRATION AWARD DATED 05/06/20 00 WAS PASSED, WHEREBY THE ASSESSEE WAS ENTITLED TO RECEIVE AN AMOUNT OF RS.19 ,81,896/- IN PLACE OF TOTAL AMOUNT OF RS.35,12,069/-. THE ASSESSEE DID NOT REC EIVE ANY AMOUNT DESPITE THE SAID ARBITRATION AWARD. THEREFORE, DURING THE YEAR UNDER CONSIDERATION ASSESSEE CLAIMED THE SAID AMOUNT AS BAD DEBT. LD. CIT(A) TH OUGH HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AS PER DECISION OF SPEC IAL BENCH IN THE CASE OF DCIT VS. SHREYAS S. MORARKHIA, 40 SOT 432 (SB), HOWEVER, HE HAS HELD THAT TO THE EXTENT AWARD WAS GRANTED IN FAVOUR OF ASSESSEE, THE CLAIM COULD NOT BE ALLOWED AND HE RESTRICTED THE CLAIM TO A SUM OF RS.15,30,17 3/-. THE ASSESSEE IS AGGRIEVED, HENCE, HAS FILED GROUND NO.1. 4. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. THE ARBITRATION AWARD WAS PASSED LONG BACK ON 5/6/2000. IT IS THE CASE OF THE ASSESSEE THAT IT COULD NOT RECOVER ANY AMOUNT DESPITE THE SAID ARBITRATION AWARD. THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN DENIED OR FOUND CONTRARY TO RECORD. IF IT IS SO, SINCE THE NATURE OF TRANSACTION IS NOT DISPUTED THAT IT IS ELIGIBLE FOR DEDUCTION AS BAD DEBT, WE FIND N O JUSTIFICATION IN RESTRICTING DISALLOWANCE TO A SUM OF RS.15,30,173/-. THE ENTIR E AMOUNT WAS ALLOWABLE AS BAD DEBT. IT MAY ALSO BE MENTIONED HERE THAT AFOR EMENTIONED SPECIAL BENCH ITA NO.1932/MUM/2012, A.Y. 2008-09 4 DECISION HAS BEEN CONFIRMED BY HONBLE BOMBAY HIGH COURT IN 342 ITR 285 . ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED . 5. APROPOS GROUND NO.3, IT WAS FAIRLY CONCEDED BY L D. AR THAT THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE AS PER DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD., 340 ITR 333(BOM). IT IS ALSO OBSERVED THAT FOLLOWING SAID DECISION LD. CIT(A) HAS REJECT ED THIS CLAIM OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF LD. CIT(A) ON THIS ISSUE IS CONFIRMED AND THIS GROUND OF THE ASSESSEE IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 05/08/2 014 ! ' #$ % &'( 05/08/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; &' DATED 05/08/2014 ! ! ! ! ' '' ' *+, *+, *+, *+, -,$+ -,$+ -,$+ -,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS ITA NO.1932/MUM/2012, A.Y. 2008-09 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 05/08/2014 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 05/08/2014 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER