ANGEL BROKING LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 3198/MUM/2010

• Counselvise Citation: 319819914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 31-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAYAK PER R K
• Assessee Lawyers: JAYDEEP ADHIYA
• Keywords: Bad and doubtful debts

Judgement Text

1 ITA NO.3198/MUM/2010 ANGEL BROKING LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI D K AGRAWAL, JM & SHRI R K PANDA, AM ITA NO. 3198/MUM/2010 (ASST YEAR 2007-08) ANGEL BROKING LIMITED, G-1, AKRUTI TRADE CENTER, ROAD NO. 7, MIDC, ANDHERI (EAST), MUMBAI 400 093 PAN AAACA 8821 G VS DCIT CIRCLE 4(1), ROOM NO. 640, 6 TH FLOOR, AAYAKAR BHAWAN, M.K. MARG, MUMBAI -20. (APPELLANT) (RESPONDENT) SESSEE BY SHRI JAYDEEP ADHIYA RESPONDENT BY SHRI A.K. MAYAK PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 03.03.2010 OF THE CIT(A)- 8, MUMBAI RELATING TO AS SESSMENT YEAR 2007-08. 2. THE ASSESSEE IN ITS ONLY EFFECTIVE GROUND HAS CH ALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF BAD DE BTS/BUSINESS LOSS OF ` 4,083,409/- MADE BY THE A.O. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF SHARES AND STOCK BROKING AND DEPOSITORY PARTICIPANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTE D THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 45,08,513/- AS BUSINESS LOSS INCLUDING BROKERAGE O F ` 4,25,104/- IN ITS PROFITS AND LOSS ACCOUNT AND ALS O HAS SHOWN RECOVERY OF BUSINESS LOSS OF ` 23,31,633/-. THE A.O. ASKED THE ASSESSEE TO EXPLA IN AS TO WHY THE BAD DEBTS WRITTEN OFF AMOUNTING TO ` 40,83,409/- SHOULD NOT BE 2 ITA NO.3198/MUM/2010 ANGEL BROKING LTD. DISALLOWED. REJECTING THE VARIOUS EXPLANATIONS GIV EN BY THE ASSESSEE AND RELYING ON A COUPLE OF DECISIONS, THE A.O. DISALLOW ED THE CLAIM OF BAD DEBTS. 2.3 IN APPEAL, THE LD. CIT(A) FOLLOWING THE DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF OMAN INTERNATIONAL BANK 313 IT R 128 HELD THAT THE CLAIM IS ALLOWABLE UP TO THE AMOUNT OF BROKERAGE EA RNED IN RESPECT OF EACH PARTY IN VIEW OF APPLICABILITY OF PROVISIONS OF SEC TION 36(2). HE, ACCORDINGLY, DIRECTED THE A.O. TO ALLOW THE CLAIM UP TO THE AMOU NT OF BROKERAGE WITH RESPECT TO EACH PARTY. 2.4 AGGRIEVED BY SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 2.5 AFTER HEARING BOTH THE SIDES, WE FIND THE ISSUE IN THE IMPUGNED APPEAL IS REGARDING THE ALLOWABILITY OF BAD DEBTS IN RESPE CT OF A SHARE BROKER. WE FIND THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SHR EYAS S. MORAKHIA [ITA NO. 3374/MUM/04 DATED 16.07.2010] WHEREIN IT WAS HELD T HAT AMOUNT RECEIVABLE BY THE ASSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIENTS AGAINST THE TRANSACTIONS OF PURCHASE OF SHARES ON THEIR BEH ALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. IT WAS HELD THAT THE BROKE RAGE/COMMISSION INCOME ARISING FROM SUCH TRANSACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BE EN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITIO N STIPULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 36(1)(VII) BY WAY OF BAD DEBTS AFTER HAVING WRITTEN OF THE SAID DEBTS FROM H IS BOOKS OF ACCOUNT AS IRRECOVERABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM BAD DEBTS OF ` 4083409/-. THE GROUND RAISED BY THE ASSESSEE IS AC CORDINGLY ALLOWED. 3 ITA NO.3198/MUM/2010 ANGEL BROKING LTD. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ITSELF I.E. ON 31.5.2011. SD/- SD/- ( D K AGRAWAL ) JUDICIAL MEMBER ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 31 ST MAY 2011 RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT, CITY -4, MUMBAI 4 CIT(A) -8, MUMBAI 5 DR BENCH G 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI 4 ITA NO.3198/MUM/2010 ANGEL BROKING LTD. DRAFT DICTATED ON 31.5.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 31.5.11 SR P S 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE B ENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS