M/S. NANDKISHORE J. DALAL, MUMBAI V. THE ITO WD 4(2)(1),

ITA 3082/MUM/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6180 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 22-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO.3082/MUM/2008 ASSESSMENT YEAR- 2004-05 SHRI NANDKISHORE J. DALAL, 609, ROTUNDA STOCK EXCHANGE, BOMBAY SAMACHAR MARG, FORT, MUMBAI-400 023 PAN-AAAPO 6195K THE ITO, WARD 4(2)(1), MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI SAMEER DALAL RESPONDENT BY: SHRI SANJEEV JAIN O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 3.3.2008 PASSED BY THE LD. CIT(A)-IV FOR THE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION O F THE ITO, WHEREBY THE AO DID NOT GRANT DEDUCTION OF RS. 4,65,124/- AS CLAIMED BY THE APPELLANT ON ACCOUNT O F BAD DEBT/BUSINESS LOSS. 2. WHILE DOING SO, THE LD. CIT(A) FAILED TO APPRECI ATE THAT (I) THE APPELLANT HAD FULFILLED ALL THE REQUISITE CONDITIONS FOR THE CLAIM OF BAD DEBT IN TERMS OF SE C. 36(1)(VII) R.W.S. 36(2) OF THE ACT. AND (II) OTHERWISE ALSO, IN THE ALTERNATIVE, THE APPEL LANT WAS ENTITLED TO THE DEDUCTION OF THIS AMOUNT BY WAY OF BUSINESS LOSS. ITA NO. 3082/M/08 2 3. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS SHREYAS S. MORAKHIA (2010) 42 DTR (MUM) (SB) 320 WH EREIN IT HAS BEEN HELD AS UNDER: 32. KEEPING IN VIEW ALL THE FACTS OF THE CASE AND THE LEGAL POSITION EMANATING FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE, WE ARE OF THE VI EW THAT THE AMOUNT RECEIVABLE BY THE ASSESSEE, WHO IS A SHA RE BROKER, FROM HIS CLIENTS AGAINST THE TRANSACTIONS OF PURCHA SE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. THE BROKERAGE/COMMISSION INCOME ARISING FROM SUCH TRANS ACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BEEN TAKEN INTO AC COUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVA NT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITIO N STIPULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DE DUCTION U/S 36(1)(VII) BY WAY OF BAD DEBTS AFTER HAVING WRITTEN OF THE SAID DEBTS FROM HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. W E, THEREFORE, ANSWER THE QUESTION REFERRED TO THIS SPE CIAL BENCH IN THE AFFIRMATIVE THAT IS IN FAVOUR OF THE ASSESSE E. THEREFORE WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE IN THE LIGHT OF THE DECISION IN THE CASE OF (SUPRA) AFTER EXAMINING WHETHER THE ASSESSEE HAS SATISFIED THE CONDITIONS FOR THE C LAIM OF BAD DEBT IN TERMS OF SEC. 36(1)(VII) R.W.S. 36(2) OF THE I.T. A CT. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF NOVEMBER, 2010 SD/- SD/- (S.V. MEHROTRA) ( ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30 TH NOVEMBER, 2010 RJ ITA NO. 3082/M/08 3 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR I BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 3082/M/08 4 DATE INITIALS 1 DRAFT DICTATED ON: 26.11.2010 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 26.11.2010 ______ 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 FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______