M/s. Standard Securities & Investment Intermediate Ltd, New Delhi V. ACIT, New Delhi

ITA 2979/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0946 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANSHU KHURANA
• Assessee Lawyers: S KRISHNAN
• Keywords: Bad and doubtful debts; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `C : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.2979/DEL./2009 (ASSESSMENT YEAR : 2006-07) M/S STANDARD SECURITIES & VS. ACIT, CIRCLE 3(1), INVESTMENT & INTERMEDIATES LTD., NEW DELHI. 8/28, WEA, ABDUL AZIZ ROAD, KAROL BAGH, NEW DELHI. (PAN/GIR NO.AAACS6908G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. KRISHNAN, ADV. REVENUE BY : SMT. ANSHU KHURANA, DR ORDER PER A.K. GARODIA: AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF THE CIT(A)-XII, NEW DELHI DATED 13.3.09 FOR ASSESSMENT YEAR 2006-07. O UT OF 4 GROUNDS RAISED BY THE ASSESSEE, THE ASSESSEE PRESSED ONLY GROUND NO.2, HE NCE REMAINING GROUNDS ARE REJECTED AS NOT PRESSED. GROUND NO.2 RAISED BY THE ASSESSEE R EADS AS UNDER: THAT THE LD.CIT(A) HAS ERRED IN SUSTAINING DISALLO WANCE OF A SUM OF RS.4,14,217 BEING THE AMOUNT OF BEHALF DEBTS WRITTEN OFF DURING THE YEAR. 2. BRIEFLY STATED, THE FACTS ARE THAT IT IS NOTED B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED DED UCTION OF RS.414217 ON ACCOUNT OF BAD DEBTS. THE ASSESSING OFFICER WAS OF THE VIEW T HAT IN THE CASE OF SHARE BROKER, ONLY BROKERAGE INCOME IS DEBITED TO THE P&L A/C, BUT THE DEBIT BALANCE ON ACCOUNT OF SUNDRY DEBTORS IS ON ACCOUNT OF BROKERAGE AS WELL AS VALUE OF SHARES PURCHASED FOR THE CLIENTS AND HENCE IN THE PRESENT CASE, THE BAD DEBTS IN QUESTIO N DO NOT FULFILL THE REQUIREMENT OF SECTION 36(2). BY MAKING THESE OBSERVATIONS, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), WHO HAS OBSER VED IN PARA.3 OF HIS ORDER THAT I.T.A. NO.2979/DEL./2009 (A.Y. : 2006-07) 2 DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS, IT HAS BEEN BROUGHT ON RECORD THAT THE SAID DEBT PERTAINED TO BROKERAGE COMMISSION OUTSTAN DING FROM THREE SUB-BROKERS, NAMELY, M/S SURYA SECURITIES, M/S MARKETING WIZARD & M/S MA YFAIR CAPITAL SERVICES. THEREAFTER, THE COMMISSIONER OF INCOME-TAX (APPEALS ) HAS OBSERVED THAT THE ASSESSING OFFICER HAS BROUGHT ON RECORD, ONE ENTRY IN THE ACC OUNT OF M/S SURYA SECURITIES IS WITH REFERENCE TO VSAT COST CHARGED BY NSC, WHICH IS A C APITAL EXPENDITURE. THEREAFTER, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS OBSERVED T HAT THE ASSESSING OFFICER HAS RIGHTLY BROUGHT ON RECORD THAT THE BILLS RAISED BY THE BROKER FOR THE TRANSACTION DONE FOR ITS SUB-BROKER ARE CONSOLIDATED BILLS, WHICH CONTAINED THE COST OF PURCHASE AND SALE AND BROKERAGE COMMISSION. THEREAFTER, HE SAYS THAT THE MAIN CONTENTION RAISED BY THE LD.AR OF THE ASSESSEE IS NOT BASED ON FACTS. HE FURTHER SAYS THAT THIS FACT HAS BEEN VERIFIED BY HIM FROM THE LEDGER ACCOUNT AND COPIES AND ANOTHER DETAILS SUBMITTED BY THE ASSESSEE. THEREAFTER, HE HAS FURTHER OBSERVED THAT THE ASSESS EE HAS NOT OBTAINED DEPOSIT OR MARGIN MONEY AS STIPULATED BY SEBI AND HENCE DEDUCTION CAN NOT BE ALLOWED TO THE ASSESSEE. HE CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE AND NO W THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. LD.AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. MOGRAN SECURITIES & CREDIT SERVICES LTD. REPORTED I N 292 ITR 339. LD.DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BEL OW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW AND THE JUDGMENT CITED BY THE LD.AR OF THE ASSESSEE. WE FIND THAT IN THE PRESENT CASE, ONE OF THE MAIN REASON FOR WHICH THE DISALLOWANCE HAS BEEN MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IS THAT THE DE BT IN QUESTION WAS NOT ONLY ON ACCOUNT OF BROKERAGE, BUT IT WAS ON ACCOUNT OF BROK ERAGE INCOME OF THE ASSESSEE AS WELL AS COST OF SHARES PURCHASED BY THE ASSESSEE ON BEH ALF OF SUB-BROKERS. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOTED IN PARA.2 OF HIS ORDER THAT DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS, IT HAS BEEN BROUGHT ON RECOR D THAT THE SAID DEBTS PERTAINED TO BROKERAGE COMMISSION OUTSTANDING FROM THREE SUB-BRO KERS, BUT LATER ON HE SAYS THAT THE I.T.A. NO.2979/DEL./2009 (A.Y. : 2006-07) 3 SAME IS ON ACCOUNT OF COST OF PURCHASE AND BROKERAG E COMMISSION. BECAUSE OF THIS CONTRADICTORY OBSERVATION OF THE COMMISSIONER OF IN COME-TAX (APPEALS) IN PARA. 3 OF HIS ORDER, WE FEEL THAT THIS MATTER SHOULD GO BACK TO T HE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION AFTER ASCERTAINING THE FACTS AS TO WHETHER THE DEBT IN QUESTION IS ON ACCOUNT OF BROKERAGE INCOME ONLY OR THE SAME IS PARTLY ON ACCO UNT OF BROKERAGE COMMISSION AND PARTLY ON ACCOUNT OF COST OF SHARES PURCHASED BY TH E ASSESSEE ON BEHALF OF THE SUB- BROKERS. IT IS ALSO OBSERVED BY THE COMMISSIONER O F INCOME-TAX (APPEALS) THAT FOR ONE OF THE SUB-BROKER, THE AMOUNT OF DEBT PERTAINED TO VSA T COST WHICH IS A CAPITAL EXPENDITURE. THIS ASPECT SHOULD ALSO BE EXAMINED BY THE ASSESSIN G OFFICER AND DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE TO THE EXTENT, INCOME HAS B EEN ACCOUNTED FOR BY THE ASSESSEE IN THE PRESENT YEAR OR IN ANY EARLIER YEAR BECAUSE TO THAT EXTENT, REQUIREMENT OF SECTION 36(2) IS SATISFIED. 5. REGARDING THE JUDGMENT OF HONBLE DELHI HIGH COU RT RENDERED IN THE CASE OF MORGAN SECURITIES & CREDIT SERVICES LTD. (SUPRA), W E FIND THAT THIS JUDGMENT IS ON THIS ASPECT THAT WHEN THE ASSESSEE HAS WRITTEN OFF THE B AD DEBTS IN HIS BOOKS OF ACCOUNT, HE IS NOT FURTHER REQUIRED TO ESTABLISH THAT THE DEBT HAS BECOME BAD. WE DECIDE THIS ASPECT IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE CANNOT BE ASKED TO PROVE THAT THE DEBT HAS BECOME BAD, BUT THE DEDUCTION HAS TO BE ALLOWED TO THE ASSESSEE ONLY TO THE EXTENT INCOME HAS BEEN ACCOUNTED FOR BY THE ASSESSEE OUT OF BAD D EBTS. WITH THESE OBSERVATIONS, WE RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR A FRESH DECISION. THIS GROUND IS, THEREFORE, ALLOWED FOR STATISTICAL PURPO SES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. ORDER PRONOUNCED IN OPEN COURT ON 09/10/2009. (R.P. TOLANI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: OCT. 09, 2009. *SKB* I.T.A. NO.2979/DEL./2009 (A.Y. : 2006-07) 4 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XII, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT