DCIT 4(1), MUMBAI V. ANGEL CAPITAL & DEBT MARKET LTD, MUMBAI

ITA 3186/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3327 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

M/S ANGEL CAPITAL AND DEBT MARKET LTD ITA NO. 3186 /M U M /201 3 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMB ER ITA NO. : 318 6 /MUM/20 1 3 (ASSESSMENT YEAR: 200 8 - 0 9 ) DY. COMMISSIONER OF INCOME TAX 4(1), 6 TH FLOOR, ROOM NO. 640, AAYAKAR BHAVAN, MUMBAI - 400 020 VS M/S ANGEL CAPITAL AND DEBT MARKET LTD , G - 1, AKRUTI TRADE CE NTRE, ROAD NO.7, MIDC, ANDHERI (EAST), MUMBAI - 400 093 .: PAN: AAACS 6308 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANDEEP GOEL RESPONDENT BY : SHRI D V LAKHANI /DATE OF HEARING : 0 8 - 0 3 - 201 6 / DATE OF PRONOUNCEMENT : 16 - 03 - 201 6 ORDER : . . : PER AMIT SHUKLA , JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGA INST IMPUGNED ORDER DATED 08 .0 2 .2013, PASSED BY LD. CIT(A) - 8 MUMBAI, IN THE QUANTUM PROCEEDINGS COMPLETED UNDER SECTION 143(3) , FOR THE ASSESSMENT YEAR 2008 - 09 , ON THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW , THE LD. CIT(A) ERRED IN ALLOW ING THE CLAIM OF BAD DEBTS OF RS.5,62,28,963/ - WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAS NOT ADJUSTED THE MONEY RECEIVED FROM SALE OF SHARES PURCHASED ON BEHALF OF CLIENTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. M/S ANGEL CAPITAL AND DEBT MARKET LTD ITA NO. 3186 /M U M /201 3 2 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THE ISSUE OF BAD DEBT HAD COME - UP FOR CONSIDERATION IN EARLIER YEAR ALSO IN ASSESSEES OWN CASE BEFORE THE TRIBUNAL AND ALSO BEFORE THE HONBLE BOMBAY HIGH COURT IN THE ASSESSMENT YEAR 2006 - 07 AND 2007 - 08. HE THUS SUBMITTED THAT , THE ISSUE INVOLVED IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY JUDICIAL PRECEDENCE . 3. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO . 4. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND ALSO THE DECISION OF HONBLE BOMBAY HIGH COURT , WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL ALSO, WE FIND THAT THE ISSUE INVOLVED IS IN FACT SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THE B RIEF FACTS ARE THAT, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE AND STOCK BROKING AND DISTRIBUTION OF FINANCIAL PRODUCTS. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 6,41,26,475/ - AS BAD DEBTS IN ITS PROFIT AND LOSS ACCOUNT. IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE AO, AS TO WHY THE BAD DEBT SHOULD NOT BE DIS ALLOWED BEC A U S E IT IS NOT ARISING OUT OF BROKERAGE WHICH IS THE MAIN ACTIVITY AN D PRIMARY SOURCE OF INCOME, THE ASSESSEE SUBMITTED THAT, AS AGAINST THE BAD DEBT OF RS.6,41,26,475/ - THE BROKERAGE EARNED WAS RS.78,97,512/ - FR O M THE SAME CLIENTS AND IT HAS ARISEN DURING THE COURSE OF CARRYING OUT OF THE SHARE BROKING BUSINESS. THE LD. AO DID NOT ACCEPT THE ASSESSEES EXPLANATION AND HELD THAT BAD DEBT OF RS. 5,62,28,963/ - CANNOT BE ALLOWED AS ELIGIBLE BAD DEBT FROM BUSINESS OF THE ASSESSEE AND AFTER DETAILED DISCUSSION, HE DISALLOWED THE SAME. THE LD. CIT(A) FOLLOWING THE DECISION OF A SISTER CONCERN OF THE ASSESSEE , PASSED BY ITAT MUMBAI BENCH IN THE CASE OF M/S ANGEL BROKING LTD IN AY 2006 - 07 AND DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF DCIT VS SHREYAS S MORARKHIA, REPORTED IN 5 ITR (TRIB) 1 (MUM)(SB) DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE. M/S ANGEL CAPITAL AND DEBT MARKET LTD ITA NO. 3186 /M U M /201 3 3 5 . IT IS AN UNDISPUTED FACT THAT, NOW IN WAKE OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHREYAS S MORARKHIA, REPORTED IN [2012] 342 ITR 285 . T HIS ISSUE NOW STANDS DECIDED IN FAVOUR OF THE ASSESSEE, WHEREIN THE HONBLE HI GH COURT HELD THAT, THE VALUE OF SHARE TRANSACTION BY THE ASSESSEE AS A STOCK BROKER ON BEHALF OF ITS CLIENTS IS AS MUCH A PART OF THE DEBT AS IS THE BROKERAGE WHICH IS CHARGED BY THE ASSESSEE ON THE TRANSACTION . I F THE BROKERAGE WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT AND THAT PART OF THE DEBT ARISEN ON THE TRANSACTION UNDERTAKEN IS TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE , THEN THE DEBT ARISES FROM THE SA ME TRANSACTION SALE OR PURCHASE, THEREFORE, REQUIREMENT OF SECTION 36(2) GET S F ULFILLED. THUS, BAD DEBT HAS TO BE ALLOWED TO THE BROKER. THIS RATIO HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE WHICH HAS BEEN AFFIRMED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF. ACCORDINGLY, WE DO NOT FIND ANY SUBSTANCE IN THE IMPUGNED ISSUE RAISED BY THE REVENUE AND SAME IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH , 2016 . SD/ - SD/ - ( ) ( ) ( RAJE NDRA ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 16 TH MARCH , 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 8 , MUMBAI . 4 ) THE COMMISSIONER OF INCOME TAX - 4 , MUMBAI . 5 ) , , / THE D.R. A BEN CH, MUMBAI. 6 ) \ M/S ANGEL CAPITAL AND DEBT MARKET LTD ITA NO. 3186 /M U M /201 3 4 COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS