The DCIT, Circle-3, Ahmedabad V. M/s. Kunvarji Commodities Brokers Pvt.Ltd., Ahmedabad

ITA 3259/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6167 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 19-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA WITH G M THAKOR
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 3259/AHD/2015 (ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(3), AHMEDABAD V/S KUNVARJI COMMODITIES BORKERS P. LTD., 111, SHYAMAK COMPLEX, B/H KAMDHENU COMPLEX, AMBAWADI, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCD9219N APPELLANT BY : SHRI PRASOON KABRA, SR. D .R. RESPONDENT BY: SHRI P.M. MEHTA WITH G.M. THAKOR ( )/ ORDER DATE OF HEARING : 01 -02-201 8 DATE OF PRONOUNCEMENT : 08 -02-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-10, AHMEDABAD DATED 10.09.2015 PERTAINING TO A.Y. 2011- 12. ITA NO. 3259 /AHD/2015 . A.Y. 2011-1 2 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 43,73,385/- IN RESPECT OF BAD DEBTS . 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF COMMODITY BROKING AS A MEMBER OF MCX AND NCDX. THE RETURN FOR THE YEAR UND ER CONSIDERATION WAS SELECTED FOR SCRUTINY AND ACCORDINGLY STATUTORY NOT ICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT, THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS. 43,73,385/-. THE ASSESSEE WAS ASKED TO EXPLAIN WHETHER THE SAID BAD DEBTS HAVE BEEN OFFERE D AS INCOME IN ANY OF THE YEAR TO FULFILL THE REQUIREMENT OF SECTION 36(2) OF THE ACT. THE ASSESSEE FILED THE DETAILS OF BAD DEBTS ALONG WITH THE FOLLOWING SUBMI SSION: IN THIS CONNECTION IT IS SUBMITTED THAT, THE ASSES SEE IS A COMMODITIES-BROKER. THE COMMODITIES-BROKERAGE IS DECLARED IN THE RETURN OF INCOME AS INCOME OF THE ASSESSEE. THE TRANSACTIONS MADE BY THE CLIENTS FROM THE ASSESSEE RESULTS INTO TWO ITEMS; ONE IS THE BROKERAGE AND OTHER IS THE PAYMEN T FOR TRANSACTIONS MADE BY THE CLIENTS. THE BROKERAGE IS CREDITED INTO PROFIT & LOSS ACCOUNT AND PAYMENTS FOR TRANSACTIONS ARE ENTERED INTO CLIENTS' ACCOUNTS. TH US PARTS OF THE RECEIPTS ARE ACCOUNTED FOR IN THE PROFIT &LOSS ACCOUNT. AS A MEMBER OF COMMODITIES EXCHANGE, IT IS THE PRIMARY LIABILITY OF THE ASSESS EE TO MAKE PAYMENT FOR TRANSACTIONS ENTERED INTO BY OUR CUSTOMERS. IF P AYMENTS ARE NOT DONE BY THE COMPANY, THEN COMPANY WOULD BE TREATED AS A DEFAULT ER AND WILL NOT BE ALLOWED TO CARRY ON THEIR BUSINESS ON THE COMMODITIES EXCHA NGE. THUS, COMPANY IS LIABLE TO MAKE THE PAYMENT FOR FULL AMOUNT FOR THE TRANSAC TIONS DONE BY THE CLIENT ON THE COMMODITIES EXCHANGE. 1.2 FOR ALL THE TRANSACTIONS MADE BY THE CLIENTS ON THE EXCHANGE MARGIN MONEY AND MARK TO MARKET PROFIT/LOSS IS DEBITED OR CREDIT ED TO THE CLIENT ACCOUNT. FARTHER IN THE ENTIRE TRANSACTION THE BROKERAGE IS COLLECTED FROM THE CLIENT WHICH IS INCLUDED IN THE TRANSACTION BILL ITSELF AND CRED ITED TO BROKERAGE ACCOUNT WHICH IS REFLECTED IN THE PROFIT & LOSS ACCOUNT. THUS, EACH AND EVERY PART OF DEBIT IS TAKEN INTO ACCOUNT WHILE COMPUTING INCOME OF THE COMPANY AS PER 36(2) OF THE I.T. ACT, ITA NO. 3259 /AHD/2015 . A.Y. 2011-1 2 3 1961 IF ANY PART OF THE DEBIT HAS NOT BEEN TAKEN IN TO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE, THEN BAD DEBT WOULD NOT BE ADMISSIBLE. HOWEVER IN THE PRESENT CASE, PART OF THE DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. THE BROKERAGE IS PART OF THE DEBT AND HAS BEEN CONSIDERED AS INCOME. IT IS NOT THE REQUIREMENT OF LAW THAT EVERY MARGIN ENTRY OF COMMODITIES TRADING SHOULD BE ROUTED THROUGH TRA DING ACCOUNT. (THE SAID STATEMENT BE VERIFIED FOR LANGUAGE AND MEANING) 5. THE A.O. WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED THE CLAIM OF BAD DEBTS OF RS. 43,73,385/ -. 6. ASSESSEE STRONGLY AGITATED BEFORE THE LD. CIT(A) AN D REITERATED ITS CLAIM OF BAD DEBTS. 7. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND DRAWING SUPPORT FROM VARIOUS JUDICIAL DECISIONS, THE LD. CIT(A) ALLOWED THE CLAIM OF BAD DEBTS. 8. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FO R THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW QUA THE ISSUE. THERE IS NO DISPUTE THAT THE ASSESS EE HAS BEEN SHOWING BROKERAGE INCOME FROM THE TRANSACTIONS ENTERED INTO BY IT WITH ITS CLIENT. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL BOMBAY IN THE CASE OF SHREYAS S. MORAKHIA AND THE S PECIAL BENCH DECISION HAS BEEN UPHELD BY THE HONBLE HIGH COURT OF BOMBAY IN 342 ITR 285 WHEREIN THE HONBLE HIGH COURT HELD THAT VALUE OF THE SHARE TRANSACTED BY A BROKER ON BEHALF OF ITS CLIENT IS VERY MUCH ALLOWABLE AS BAD DEBTS. WE DO NOT FIND ANY ITA NO. 3259 /AHD/2015 . A.Y. 2011-1 2 4 ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A ), THEREFORE, NO INFERENCE IS CALLED FOR. 10. APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08 - 02- 20 18 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 08 /02/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD