DCIT 4(1), MUMBAI V. GSB CAPITAL MARKETS LTD, MUMBAI

ITA 4090/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48706 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 11-04-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIPUL B JOSHISAMEER G DAL AL
• Assessee Lawyers: ABANI KANTA NAYAK
• Keywords: Depreciation; Bad and doubtful debts; Deemed dividend
• Section: 37; 15; 43(5)

Judgement Text

PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL AND SHRI PRAMOD KUMAR ITA NO. 4090/MUM/08 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER WD.4(1)(2) R.NO.636, 6 TH FLR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. VS. GSB CAPITAL MARKETS LTD. 815, 8 TH FLR., STOCK EXCHANGE TOWER, DALAL STREET, MUMBAI 400 023. (APPELLANT) (RESPONDENT) ITA NO. 3483/MUM/08 ASSESSMENT YEAR : 2004-05 GSB CAPITAL MARKETS LTD. 815, 8 TH FLR., STOCK EXCHANGE TOWER, DALAL STREET, MUMBAI 400 023. VS. INCOME TAX OFFICER WD.4(1)(2) R.NO.636, 6 TH FLR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. (APPELLANT) (RESPONDENT) ITA NO. 3007/MUM/09 ASSESSMENT YEAR : 2005-06 DCIT 4(1), R.NO.640, 6 TH FLR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. VS. GSB CAPITAL MARKETS LTD. 815, 8 TH FLR., STOCK EXCHANGE TOWER, DALAL STREET, MUMBAI 400 023. (APPELLANT) (RESPONDENT) ITA NO. 1826/MUM/09 ASSESSMENT YEAR : 2005-06 GSB CAPITAL MARKETS LTD. 815, 8 TH FLR., STOCK EXCHANGE TOWER, DALAL STREET, MUMBAI 400 023. VS. DCIT 4(1) R.NO.640, 6 TH FLOOR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. (APPELLANT) (RESPONDENT) PAGE 2 OF 16 APPELLANT BY : SHRI VIPUL B. JOSHI/ SAMEER G. D ALAL. RESPONDENT BY : SHRI ABANI KANTA NAYAK (D.R.) O R D E R PER PRAMOD KUMAR: 1. THESE ARE APPEALS CALL INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 28 TH MARCH, 2008 AND 12 TH FEBRUARY, 2009 FOR THE ASSESSMENT YEARS 2004-05 & 2005-06, RESPECTIVELY. AS THESE APPEAL S WERE HEARD TOGETHER AND PERTAIN TO THE SAME ASSESSEE, THESE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ASSESSMENT YEAR: 2004-05: 2. IN GROUND NOS. 1 TO 5 OF REVENUES APPEAL, THE A SSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCES: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING TH E BAD DEBTS WRITTEN OFF BY THE ASSESSEE IN THE CASE OF SHRI SAY ARMAL DOSHI IGNORING THE FACT THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE VACATION ORDER INSPITE OF THE ATTACHMENT PROPERTIES OF SHRI SAYARMAL DOSHI. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING TH E BAD DEBTS IN RESPECT OF SHRI RAJENDRA MISHRA WITHOUT RECITING THE REASONS OF NON RECOVERY OF THE AMOUNT INSPITE THE A RBITRATION AWARD BEING FAVOUR OF THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING TH E BAD DEBTS AMOUNT OF RS 346035/- IN RESPECT OF M/S. M.M. FINVE STRADE (P) LTD. WITHOUT EVEN EXAMINING THE CONSENT DECREE AND ASCERTAINING THE REASONS FOR NON-RECOVERY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY HAS NOT ESTABLISHED THAT THE BAD D EBTS HAVE BECOME BAD AND HAS ALSO NOT ESTABLISHED THAT THE LO SS HAS CRYSTALLIZED DURING THE ASSESSMENT YEAR 2004-05. PAGE 3 OF 16 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING TH E BAD DEBTS U/S.36(1)(VII), INSPITE OF THE FACT THAT THE ASSESS EE DID NOT FULFIL THE CONDITIONS LAID DOWN U/S.36(2) OF THE I.T. ACT, 1961 AS NOTED BY THE ASSESSING OFFICER. 3. IN AN INTERCONNECTED GROUND OF APPEAL, THE ASSES SEE HAS RAISED THE FOLLOWING GRIEVANCES: 4. THE LEARNED CIT(A) GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES AFTER HOLDING AND CONFI RMING THAT THE AMOUNT OF RS 12,92,123/- DUE FROM THE THREE DEB TORS HAVE BECOME NOT RECOVERABLE AND BECOME BAD BUT FAILED TO IN CONCLUDING THAT THE SAME IS ALLOWABLE AS BUSINESS L OSS U/S.28 OF THE I.T. ACT, 1961 . 4. THE MATERIAL FACTS ARE LIKE THIS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS OF RS 12,92,123/-. THESE BAD DEBTS REPRESE NTED UNRECOVERED DUES FROM SAYARAM DOSHI (RS 8,09,603/-), RAJENDRA MISHR A (RS 1,36,484/-) AND M.M. FINVESTRADE PVT. LTD. (RS 3,46,035/-). IT WAS ALSO NOTED THAT ARBITRATOR AWARDS WERE IN FAVOUR OF THE ASSESSEE IN RESPECT OF ALL THESE DEBTORS AND THAT THE ASSESSEE HAD ALSO MADE EFFORTS TO OBTAIN DECREE IN RESPECT OF SAYARAM DOSHI, BUT YET MONIES COULD NOT BE RECOVERED. THER E WAS NO DISPUTE, HOWEVER, THAT AMOUNTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS. ON THESE FACTS, THE ASSESSING OFFICER DISALLOWED THE CLAIM O F BAD DEBTS BY HOLDING THAT NEITHER THE AMOUNT HAS BECOME ACTUALLY BAD, NOR THE ASSESSEE HAS ESTABLISHED THAT REQUIREMENTS OF SECTION 36(2) HAVE BEEN COMPLIED IN IT. WHILE DOING SO THE ASSESSING OFFICER, INTER ALIA, O BSERVED AS FOLLOWS: 5.14 IT APPEARS THAT THE ASSESSEE HAS CLASSIFIED T HE SAID DEBT AS BAD DEBT ONLY FOR THE REASON THAT IT HAS NOT REC EIVED ANY PAYMENTS. BUT THE ASSESSEE HAS NOT BROUGHT OUT ANY THING ON RECORD TO JUSTIFY THE BASIS OF THAT BELIEF THAT DEBT IS BA D DEBT AS TO WHAT EFFORTS WERE MADE TO MAKE RECOVERY. IN ACTION ON T HE PART OF THE ASSESSEE CANNOT BE REASON OR BASS FOR BELIEF OF BAD DEBT. HENCE, THE ASSESSEE HAS FAILED TO JUSTIFY ITS CLAIM THAT THE D EBT WITH REGARD TO THE SAID DEBTOR IS A BAD DEBT WHICH IS A PRIMARY RE QUIREMENT U/S.36(1)(VII). IN THE FACTS AND CIRCUMSTANCES ST ATED ABOVE, IT IS HELD THAT CLAIM OF BAD DEBT IS NOT ESTABLISHED. PAGE 4 OF 16 5.15 THE ASSESSEE HAS NOT ESTABLISHED THAT THE AMOU NT OF BROKERAGE HAS BEEN CONSIDERED AS INCOME IN THE CORR ESPONDING YEAR. WITHOUT PREJUDICE, THE PART OF THE DEBT EVEN IF CON SIDERED AS PART OF INCOME SINCE THE DEBT HAS NOT BEEN ESTABLISHED TO B E BAD DEBT AND ASSESSEE DOS NOT FULFILS THE REQUIREMENT OF PROVISI ONS OF SECTION 36(2) OF THE I.T. ACT, 1961. HENCE THE AMOUNT OF ` 12,92,123/- IS DISALLOWED U/S.36(1)(VII) R.W.S. 36(2) OF THE I.T. ACT, 1961 AND ADDED TO THE TOTAL INCOME. 5. THE ASSESSING OFFICER ALSO REJECTED THE CLAIM OF BUSINESS LOSS. THOUGH, FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE, I T IS NOT REALLY NECESSARY TO GO ANY FURTHER INTO THAT ASPECT OF THE MATTER. 6. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). LEARNED CIT(A) UPHELD THE CONTENTIONS OF THE ASSESS EE AND, AFTER ANALYSING FACTS OF ASSESSEES CASE, CONCLUDED AS FOLLOWS: 5.9 IN VIEW OF THE ABOVE, IT IS HELD THAT:- A) EXPLANATION TO SECTION 37 IS NOT APPLICABLE; B) THE AMOUNTS DUE FROM THE 3 PARTIES HAVE BECOME N OT RECOVERABLE AND HAVE BECOME BAD; C) THE DEDUCTION U/S.36(1)(VII) IS TO BE ALLOWED SU BJECT TO FULFIL THE CONDITIONS OF SECTION 36(2). D) ON BEING DEMONSTRATED BY THE APPELLANT THAT THE AMOUNTS CLAIMED AS BAD DEBT HAS BEEN TAKEN FOR COMPUTATION FOR TOTAL INCOME OF ANY PREVIOUS YEAR, THE ASSESSING OFFICER SHALL ALLOW THE AMOUNTS OF BAD DEBTS ACCORDINGLY. 7. AGGRIEVED BY THE STAND SO TAKEN BY THE CIT(A), B OTH THE PARTIES ARE IN APPEAL BEFORE US. THE ASSESSING OFFICER IS AGGRIEV ED THAT THE CIT(A) HELD THE BAD DEBTS TO BE ALLOWABLE IN PRINCIPLE, WHILE THE A SSESSEE IS AGGRIEVED THAT THE CIT(A) DID NOT ADJUDICATE ON ASSESSEE IN ALTERN ATIVE PLEA OF CLAIM BEING ADMISSIBLE ALSO ON THE GROUND THAT IT IS IN THE NAT URE OF BUSINESS LOSS. PAGE 5 OF 16 8. HAVING HEARD THE RIVAL CONTENTIONS, WE SEE NO RE ASONS TO INTERFERE IN THE MATTER. IT IS SO FAR THE REASON THAT, AS AGRE ED BY LEARNED REPRESENTATIVES, THE ISSUE IN APPEAL IS HOW SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF TRF LTD. VS CIT 323 ITR 397 (SC). AS REGARDS LEARNED DRS SUGGESTION THAT THE MATER SHOULD BE REMITTED TO THE FILE OF THE ASSESSING OFFICER SO AS TO VERIFY COMPLIANCE WITH SECTION 36(2), WE HAVE NOTED THAT CIT(A) HAS HIMSEL F DIRECTED THAT THE ASSESSING OFFICER HAS TO ALLOW DEDUCTION FOR BAD DE BTS ONLY AFTER HE IS SATISFIED THAT CONDITIONS OF SECTION 36(2) ARE SATI SFIED. THE DIRECTIONS GIVEN BY THE CIT(A) ARE QUITE JUSTIFIED AND NEED NO INTER FERENCE. AS FOR LEARNED COUNSELS PRAYER FOR ADJUDICATION ON ALTERNATE PLEA , WE SEE NO SUBSTANCE IN THIS REQUEST EITHER ONCE MAIN PLEA ITSELF IS UPHELD , AS IS THE POSITION IN THIS CASE, ALTERNATIVE PLEA IS RENDERED INFRUCTUOUS AND PURELY ACADEMIC. THIS IS NO NEED TO ADJUDICATE ON THE SAME. 9. GROUND NOS.1 TO 5 OF THE ASSESSING OFFICER AND G ROUND NO.4 OF THE ASSESSEE ARE THUS DISMISSED. 10. GROUND NOS. 6 & 7 IN ASSESSING OFFICERS APPEAL ARE GENERAL IN NATURE AND DO NOT CALL FOR ANY ADJUDICATION. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSING OFFICE R IS DISMISSED . 12. COMING BACK TO ASSESSEES APPEAL GROUND NO.1 IN ASSESSEES APPEAL IS AS FOLLOWS: 1 THE LEARNED CIT(A) GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES IN HOLDING AND CONFIRMI NG THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM ON DEPRECIATION ON BOMBAY STOCK EXCHANGE CARD AMOUNTIN G TO RS 32,81,250/-. 13. LEARNED COUNSEL DOES NOT PRESS THE ABOVE GROUND OF APPEAL, AND, ACCORDINGLY, THE SAME IS DISMISSED FOR WANT OF PROS ECUTION. 14. GROUND NO.1 IS THUS DISMISSED. PAGE 6 OF 16 15. IN GROUND NO.2 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCES: 1 THE LEARNED CIT(A) GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES IN HOLDING AND CONFIRMI NG THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE DISALLOWANCE EOF INTEREST EXPENDITURE CLAIM AT RS 1,30,480/- U/S .40A(2)(A) AS AGAINST THE EXPLANATION OF THE ASSESSEE THAT NO ELEMENT OF BORROWED FUND UTILIZED FOR FINANCING THE TRADE CONC ERNING TO SPECIFIED PERSONS AND APPELLANT COMPANY HAVE SUFFIC IENT FUND WHERE NO INTEREST COST IS INCURRED AND FROM SUCH AV AILABLE FUND AMOUNT ARE STANDING TO DEBT OF SUCH PERSONS AN D AMOUNT HAVE BEEN RECOVERED SUBSEQUENTLY, THEREFORE NO PART OF THE INTEREST EXPENDITURE IS TO BE DISALLOWED. 16. TO ADJUDICATE ON THESE GRIEVANCES, ONLY A FEW M ATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER DISALLOWED RS 4,90,072/- ON ACCOUNT OF INTE REST PAID BY OBSERVING AS FOLLOWS: 4.10 ANALYSIS OF THE OVER DRAFT ACCOUNT: THE ASSES SEE IS HAVING AN OVERDRAFT ACCOUNT NO.CD7163 WITH BANK OF INDIA STOCK EXCHANGE BRANCH, MUMBAI. THE ASSESSEE SUBMIT TED A COPY OF THE SAID BANK STATEMENT FOR THE RELEVANT PR EVIOUS YEAR. THE CLOSING BALANCE AS PER BANK STATEMENT IS RS 14, 84,555.80 DR. THE BALANCE SHEET SHOWS A CREDIT BALANCE OF RS 51,29,938/- AND ASSESSEE HAS FILED A BANK RECONCILI ATION STATEMENT. THE BALANCES FLUCTUATE FROM DEBIT BALAN CE TO CREDIT BALANCE AN VICE VERSA THROUGH OUT THE YEAR. THE PEAK DEBIT BALANCE IS RS 4,53,50,151/- ON 17.12.2003. T HE ASSESSEE HAS ALREADY STATED THAT IT IS PAYING INTEREST OF RS 10,19,1448. 4.11 A SUMMARY OF THE COMPARATIVE STATUS OF THE THR EE ACCOUNTS IS GIVEN BELOW: A N ANALYSIS OF THE ABOVE DATA SHOWS THAT THERE IS A DI RECT CO- RELATION BETWEEN THE OVERDRAFT IN THE BANK ACCOUNTS AND THE DATE O/D ACCOUNT RAMAKANT BIYANI GSB SHARE CUSTODIAN SERVICES LTD. CO-RELATION FACTOR = (C+D) % B 04.04.2003 25,17,702.01 DR 42,28,514 DR (PEAK DEBIT) 45,41,619.22 DR 348 % 12.12.2003 4,53,50,151 DR (PEAK DEBIT) 33,20,747.84 DR 50,87,802 DR 18% 16.01.2004 2,03,91,638.11 DR 32,13,559.05 DR 1,58,48,651 DR (PEAK DEBIT) 93% 31.03.2004 14,04,555.80 DR 12,72,479.21 DR 73,25,094.11 DR 612 % PAGE 7 OF 16 DEBIT BALANCE IN THE ACCOUNT OF THE ABOVE SAID PERS ONS SPECIFIED U/S.40A(2)(B) INASMUCH AS THE ASSESSEE HA S NET DEBIT BALANCE IN OVERDRAFT ACCOUNT ON ALL THE DATES OF PE AK DEBIT AND AT THE SAME TIME HAS DEBIT BALANCE IN THE ACCOU NTS OF THE SAID PERSONS. THE LAST COLUMN GIVES THE PERCENTAGE OF DEBIT BALANCES OF SAID DEBTORS TO THE OVERDRAFT ACCOUNT A ND IT ALSO SHOWS HAT THERE IS A WIDE FLUCTUATION THEREOF. 4.12 THE ASSESSEE WOULD ABOVE AVOIDED THE INTEREST BURDEN ON THE UNSECURED LOAN HAD IT RECOVERED THE A MOUNT FROM THE SAID DEBTORS WHO ALSO HAPPEN TO BE PERSONS SPECIFIED U/S.40A(2)(B) OF THE I.T. ACT, 1961. IT IS APPAREN T THE ASSESSEE HAS ALLOWED THE AFORESAID BENEFIT TO THESE PERSONS SOLELY ON THE GROUND THAT THEY ARE DIRECTORS AND ASSOCIATE CO NCERN. FURTHER THE CLAIM THAT SUCH PERSONS CONTRIBUTE TO T HE BUSINESS IS OF NO SIGNIFICANCE THAT THE BROKERAGE EARNED FRO M THESE PERSONS IS A MERE RS 79,102/- WHICH CONSTITUTES ONL Y 1.08% OF THE BROKERAGE. HENCE, THE PROVISIONS OF SEC.40A(2) (A) R.W.S. 36(1)(III) ARE ATTRACTED. 4.13 AN ASSESSEE WITH LIQUIDITY CANNOT CLAIM THAT I T CAN GIVE INTEREST FREE FACILITIES TO THE SAID PERSONS A ND OTHERS AND THEN BORROW FUNDS FROM THE BANK ON INTEREST FOR BUS INESS PURPOSES. SUCH BORROWINGS WILL NOT BE FOR BUSINESS PURPOSES, BUT FOR SUPPLEMENTING THE CASH DIVERTED BY THE ASSE SSEE IN THE FORM OF FINANCING THE SHARE TRANSACTIONS OF THE AFO RESAID PERSONS WITHOUT ANY BENEFIT TO IT INASMUCH AS THE A SSESSEE HAS EARNED A MERE 1.08% OF THE TOTAL BROKERAGE. THEREF ORE, THE ASSESSEE IS NOT THE BENEFICIARY OF THE TRANSACTIONS MADE BY SUCH PERSONS. 4.14 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE QUANTUM OF INTEREST WHICH IS EXCESSIVE AND UNREASON ABLE, IS COMPUTED TAKING INTO CONSIDERATION THE RATIO OF DEB IT BALANCE IN THE ACCOUNT OF SAID PERSONS AND PEAK DEBIT BALAN CE IN THE OVERDRAFT ACCOUNT AS DETAILED BELOW: PEAK DEBIT BALANCE IN THE A/C OF RAMAKANT BIYANI = . AND GSB SHARE CSTODIAN SERVICES LTD. X INTEREST PEAK DEBIT BALANCE IN THE OVERDRAFT ACCOUNT = RS 42,28,514 + RS 1,58,48,651 X RS 11,06,971 RS 4,53,50,151 = RS 2,00,77,165 X RS 11,06,971 RS 4,53,50,151 = RS 4,90,072/- THE ASSESSEE HAS INCURRED INTEREST LIABILITY OF RS 11,06,971/- ON ACCOUNT OF OD FACILITY AND INTEREST BEARING UNSE CURED LOANS. AS SEEN ABOVE, AN AMOUNT OF RS 4,90,072/- IS ATTRIBUTABLE O TRANSACTIONS CARRIED ON BY THE DIREC TOR AND ASSOCIATE CONCERN. HENCE, THE AMOUNT OF RS 4,90,07 2/- IS CONSIDERED AS NOT INCURRED FOR BUSINESS PURPOSES AN D PAGE 8 OF 16 DISALLOWED U/S.36(1)(III). SINCE, IT HAS ALREADY BEEN DISCUSSED THAT THE FUNDS HAVE BEEN UTILISED FOR HE BENEFIT OF PERSONS SPECIFIED U/S.40A(2)(B) OF THE I.T. ACT, 1961, THE AMOUNT OF RS 4,90,072/- IS ALSO CONSIDERED AS INTEREST BORNE BY THE ASSESSEE AND CORRESPONDS TO THE UNREASONABLE AND EXCESSIVE B ENEFITS ALLOWED TO THE SAID PERSONS. HENCE THE AMOUNT IS A LSO DISALLOWED U/S.40A(2)(A) OF THE I.T. ACT, 1961. 17. IN SHORT THUS, THE ASSESSING OFFICER DISALLOWED INTEREST ON THE GROUND THAT INTEREST BEARING FUNDS WERE USED FOR NON BUSIN ESS PURPOSES. THE STAND SO TAKEN BY THE LD DIT(A) WAS CONFIRMED IN APPEAL B Y THE CIT(A), THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 18. HAVING HEARD THE RIVAL CONTENTION AND HAVING PE RUSED THE MATERIAL ON RECORD, WE ARE INCLINED TO UPHOLD THE PLEA OF THE A SSESSEE FOR MERE REASONS THAN ONE. FIRSTLY, AS LEARNED COUNSEL RIGHTLY CON TENDS, WHAT HAS BEEN TERMED AS DIVERSION OF FUNDS BY THE ASSESSING OFFIC ER IS NOT CORRECT INASMUCH AS A PLAIN LOOK AT THE LEDGER ACCOUNT SHOWS THE SIS TER CONCERNS DUES ARE COMMERCIAL DUES, ON ACCOUNT OF SALES AND PURCHASES, AND NOT ON ACCOUNT OF DIVERSION FUNDS. EVEN ASSUMING THAT BORROWED FUND S ARE BLOCKED IN THESE DUES PAYABLE BY SISTER CONCERN; THE FUNDS ARE USED IN BUSINESS ONLY. THE FUNDS SO BLOCKED IN DUES ON ACCOUNT OF BUSINESS TRA NSACTIONS CANNOT BE SAID TO HAVE BEEN DIVERTED FOR NON BUSINESS PURPOSES. TH AT APART, IN ANY EVENT, THE ASSESSEE HAD SUFFICIENT NON INTEREST BEARING FU NDS FOR IN EXCESS OF MONIES RECOVERABLE FORM SISTER CONCERNS, AND, FOLLOWING TH E PRINCIPLES LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. RELIAN CE UTILITIES AND POWER LTD. (313 ITR 340), THE INTEREST DISALLOWANCE COULD NOT HAVE BEEN MADE. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFIC ER TO DELETE IMPUGNED DISALLOWANCES. 19. GROUND NO.2 IS THUS ALLOWED. 20. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: PAGE 9 OF 16 3. THE LEARNED CIT(A) GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES IN HOLDING AN CONFIRMING TH E ACTION OF ASSESSING OFFICER IN CONFIRMING THE DISALLOWANCE OF INTEREST PAYABLE TO DEBI ON SEBI FEES U/S.43B PROVIDED FOR A N CLAIMED BY THE ASSESSEE ON ACCRUAL BASIS AND BE ALLOWED ON THE YEAR OF PAYMENT, WITHOUT ACCEPTING THE EXPLANATION OF THE A SSESSEE THAT SUCH AMOUNT OF INTEREST IS NOT COVERED U/S.43B AND THEREFORE SUCH AMOUNT AS PROVIDED FOR AND CLAIMED B Y THE ASSESSEE IS TO BE ALLOWED AND NECESSARY RELIEF BE A LLOWED. 21. THE ONLY GRIEVANCE PRESENTED BY THE LEARNED COU NSEL, IN THIS REGARD, IS THAT DIRECTIONS BE ISSUED IN THE ASSESSMENT YEAR 2 005-06 THAT THE DEDUCTION BE ALLOWED ON PERMANENT BASIS. IT IS POIN TED OUT THAT DESPITE DIRECTION OF THE CIT(A), THE ASSESSING OFFICER HAS NOT YET ALLOWED THE DEDUCTIONS IN ASSESSMENT YEAR 2005-06 AS WELL. IT IS SUBMITTED THAT WE SHOULD GIVE DIRECTION WHILE DISPOSING OF 2005-06 FO R ALLOWING DEDUCTION. 22. WE SEE NO SUBSTANCE IN THE PLEA. ONCE THE CIT( A) HAS ISSUED APPROPRIATE DIRECTIONS, WHICH ARE NOT CHALLENGED ON MERITS AND UNLESS WE ARE IN SEISN OF APPEAL EFFECT PROCEEDINGS, IT IS NOT FOR US TO INTERFERE IN THE MATTER. 23. GROUND NO.3 IS THUS DISMISSED. 24. GROUND NO.4 IS ALREADY DEALT ABOVE WHILE DEALIN G WITH INTERCONNECTED GRIEVANCES OF ASSESSING OFFICER. THE SAME IS, FOR THE REASONS SET OUT EARLIER IN THE ORDER, DISMISSED 25. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. TO SUM UP, WHILE THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TER MS INDICATED ABOVE, THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMISSED. ASSESSMENT YEAR: 2005-06 PAGE 10 OF 16 26. GROUND NO.1 OF REVENUES APPEAL RELATES TO DELE TION OF SUNDRY BALANCES WRITTEN OFF. 27. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` .8,707 AS SUNDRY BALANCES WRITTEN OFF. BEFORE THE ASSESSING OFFICER, THE ASSESSEE COULD NOT FURNISH ANY DETAILS THE REASONS OF WRITTEN OFF. THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SUND RY BALANCES WRITTEN OFF PERTAINS TO BAD DEBT AND CONDITIONS OF SECTION 36(1 ) (VII) AND 36(2) WERE NOT FULFILLED AND, THEREFORE, THE CLAIM WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHICH WAS ALLOWED BY THE CIT (A) ON THE GROUND THAT THE AMOUNT TAKES PLACE IN NORMAL COURSE OF BUSINESS AND IS INCIDENTAL TO THE BUSINESS. AGGRIEVED, THE ASSESSING OFFICER IS IN A PPEAL BEFORE US. 28. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE SEE NO REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A) CONSIDERING THE FACT THAT THE AMOUNT WRITTEN OFF IS VERY SMALL AND IS INCIDENTAL TO THE BUSINESS. WE, ACCORDINGLY, UPHOL D THE ORDER OF THE CIT(A). THIS GROUND IS THUS DISMISSED. 29. GROUND NOS.2 & 3 OF REVENUES APPEAL PERTAIN TO LOSS ON ACCOUNT OF PURCHASE AND SALE OF MUTUAL FUND. 30. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS PURCHASED MUTUAL FUND OF ` .1,05,00,000 AND SOLD THE SAME AT ` .85,96,065 RESULTING INTO A NET LOSS OF ` .19,03,935 AND SUCH LOSS HAS BEEN SET OFF AGAINST DELIVERY BASED SHARE TRADING INCOME. IT WAS IN THI S BACKDROP THAT THE ASSESSING OFFICER OBSERVED THAT THE TRANSACTION OF MUTUAL FUND CANNOT BE CARRIED OUT IN THE OPEN MARKET AND HAS TO BE PURCHA SED AND SOLD THROUGH MUTUAL FUND ONLY. IT WAS ALSO OBSERVED THAT THERE W ERE HARDLY ONE OR TWO TRANSACTIONS OF SALE OR PURCHASE OF MUTUAL FUND DUR ING THE YEAR AND THUS IT CANNOT BE TREATED AS BUSINESS TRANSACTION. ACCORDIN GLY, SET OFF OF LOSSES OF PAGE 11 OF 16 MUTUAL FUND OF ` .19,03,935 WAS DENIED BY THE AO. AGGRIEVED, THE AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 31. BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSE SSEE THAT NON-DELIVERY BASED TRANSACTION IS A SPECULATIVE TRANSACTION WITH IN THE MEANING OF SECTION 43(5) BUT EVEN THE DELIVERY TRANSACTION IS TO BE TR EATED AS SPECULATIVE TRANSACTION WITHIN THE MEANING OF EXPLANATION TO SE CTION 73. HAVING NOTED THIS, THE CIT (A) GRANTED RELIEF BY OBSERVING THAT THERE IS NO FINDING REGARDING APPLICABILITY OF EXPLANATION TO SECTION 7 3 AND THAT IN ANY EVENT EXPLANATION TO SECTION 73 IS APPLICABLE TO BOTH THE SITUATIONS I.E. IN WHICH THE ASSESSEE INCURS LOSS OR PROFIT. HE, THUS, CONCLUDE D THAT THE PROFITS FROM NON- DELIVERY BASED SHARE TRADING IS A SPECULATION PROFI T AND THE LOSS FROM DELIVERY BASED SHARE TRADING, WHICH IS A SPECULATIO N LOSS IN VIEW OF EXPLANATION TO SECTION 73 AND, ACCORDINGLY, SUCH LO SS IS REQUIRED TO BE SET OFF AGAINST THE PROFIT. AGGRIEVED, THE REVENUE IS IN A PPEAL BEFORE US. 32. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 33. WE FIND THAT THERE IS NO DISCUSSION BY THE ASSE SSING OFFICER AT ANY STAGE REGARDING APPLICATION OF EXPLANATION TO SECTI ON 73 TO THE FACTS OF THIS CASE. IN ANY EVENT, WHETHER THERE IS A LOSS OR PRO FIT IN THE BUSINESS IN SHARES AND SECURITIES, AS PER PROVISIONS OF EXPLANATION TO SECTION 73, THESE ARE TO BE TREATED AS BELONGING TO SPECULATION BUSINESS. IN O THER WORDS, THE PROFIT ARISING ON SALE AND PURCHASE OF SHARES, EVEN IF THE SE ARE DELIVERY BASED TRANSACTION WILL BE TREATED AS BELONGING TO SPECULA TION BUSINESS WITHIN THE MEANING OF EXPLANATION TO SECTION 73. HONBLE BOMBA Y HIGH COURT, IN THE CASE OF CIT VS LOKMAT NEWSPAPERS PVT LTD (322 ITR 43), HAS HELD THAT IRRESPECTIVE OF WHETHER OR NOT THE PROFITS ON SALE OF SHARES AROSE FROM DELIVERY BASED TRADING OR NON DELIVERY BASED TRADIN G, AS LONG AS ASSESSEE IS HIT BY EXPLANATION TO SECTION 73, THE ENTIRE PROFIT S WILL BE DEEMED TO BE SPECULATION PROFITS AND, ACCORDINGLY, LOSSES FROM N ON DELIVERY BASED PAGE 12 OF 16 ACTIVITY WILL ALSO BE ELIGIBLE FOR SET OFF AGAINST PROFITS FROM DELIVERY BASED TRANSACTIONS AS WELL. THEIR LORDSHIPS HAVE NOTED THE SUBMISSION OF THE REVENUE IS THAT A LOSS WHICH ARISES ON ACCOUNT OF A TRANSACTION OF THE SALE AND PURCHASE OF SHARES WOULD CONSTITUTE A LOSS FROM A SPECULATION BUSINESS FOR THE PURPOSES OF THE EXPLAN ATION. BUT, THAT THE PROFIT WHICH ARISES FROM A TRANSACTION INVOLVIN G THE ACTUAL DELIVERY OF SHARES WOULD NOT CONSTITUTE A PROFIT FO R THE PURPOSES OF SUB-SECTIONS (1) AND (2) OF SECTION 73 IN RESPECT O F WHICH A SET OFF CAN BE GRANTED , WHICH HAS BEEN REJECTED UNEQUIVOCALLY BY THEIR LORDSHIPS BY OBSERVING AS FOLLOWS : TO ACCEPT THE SUBMISSION OF THE REVENUE WOULD BE TO INTRODUCE A RESTRICTION INTO THE SCOPE AND AMBIT OF THE DEEMI NG FICTION WHICH IS CREATED BY THE EXPLANATION TO SECTION 73, WHICH IS NOT CONTEMPLATED BY PARLIAMENT. ONCE A DEEMING FICTION IS CREATED BY LAW, IT MUST BE GIVEN FULL AND FREE EFFECT, OF C OURSE, IN RELATION TO THE AMBIT WITHIN WHICH IT IS INTENDED T O OPERATE. THE DEEMING FICTION CREATED BY THE EXPLANATION TO SECTION 73 DEFINES WHEN AN ASSESSEE IS TO BE DEEMED TO BE CARR YING ON A SPECULATION BUSINESS FOR THE PURPOSES OF THE SECTIO N. THE DEEMING FICTION IS, THEREFORE, ONE WHICH ARISES SPE CIFICALLY IN THE CONTEXT OF THE PROVISIONS OF SECTION 73 AND IS CONFINED TO THAT PURPOSE ALONE. THE EXPLANATION STIPULATES THAT WHERE AN ASSESSEE IS A COMPANY WHOSE BUSINESS CONSISTS IN AN Y PART OF THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, IT SHALL BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF PURCHASE AND SALE OF SUCH SHARES. WHETHER OR NOT IT IS A PROFIT OR LOSS THAT HAS RESULTED FROM CARRYING ON SUCH BUSINESS, IS A CONSIDERATION WHICH IS ALIEN TO THE MEANING OF WHAT CONSTITUTES A SPECULAT ION BUSINESS BY THE EXPLANATION TO SECTION 73. ONCE AN ASSESSEE IS DEEMED TO BE CARRYING ON A SPECULATION BUSINESS FOR THE PURPO SE OF SECTION 73, ANY LOSS COMPUTED IN RESPECT OF THAT SP ECULATION BUSINESS, CAN BE SET OFF ONLY AGAINST THE PROFITS A ND GAINS OF AN OTHER SPECULATION BUSINESS. SIMILARLY, FOR THE PURP OSES OF SUB- SECTION (2), THE LOSS IN RESPECT OF A SPECULATION B USINESS WHICH HAS NOT BEEN SET OFF EITHER IN WHOLE OR IN PART, CA N BE CARRIED FORWARD AND CAN BE SET OFF AGAINST PROFITS AND GAIN S OF ANY PAGE 13 OF 16 SPECULATION BUSINESS. THE EXPRESSION ANY SPECULAT ION BUSINESS MEANS A SPECULATION BUSINESS OF THE ASSES SEE IN RESPECT OF WHICH PROFITS AND GAINS FOR THE ASSESSME NT YEAR IN QUESTION HAVE ARISEN AND THERE IS NO JUSTIFICATION TO RESTRICT THE CONTENT OF THAT SPECULATION BUSINESS WHERE PROF ITS HAVE ARISEN BY EXCLUDING A BUSINESS INVOLVING ACTUAL DEL IVERY OF SHARES. NO SUCH RESTRICTION IS FOUND IN THE EXPLANATION . TO IMPOSE ONE IS A LEGISLATIVE FUNCTION. IN OTHER WORD S, ONCE THE ASSESSEE IS CARRYING ON A SPECULATION BUSINESS AND THE PROFITS AND GAINS HAVE ARISEN FROM THAT BUSINESS DURING THE COURSE OF THE ASSESSMENT YEAR, THE ASSESSEE IS ENTITLED TO SE T OFF THE LOSSES CARRIED FORWARD FROM A SPECULATION BUSINESS ARISING OUT OF A PREVIOUS ASSESSMENT YEAR. 34. IN VIEW OF ABOVE DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE SEE NO REASON TO INTERFERE TO THE CONCLUSI ONS ARRIVED BY THE CIT (A) AND, ACCORDINGLY, CONFIRM THE SAME. 35. THIS GROUND IS THUS DISMISSED. 36. GROUND NOS.4 TO 9 READ AS UNDER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF ` .1.81 LAKHS MADE IN RESPECT OF D-MAT CHARGES, WITHOUT REALIZING THE FAC T THAT THESE WERE COMPOSITE CHARGES ALONGWITH TRANSACTION CHARGES FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED BY THE EXCHANGE TO ITS MEMBERS AND THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN IGNORING THE FACT THAT THESE SERVI CES ARE EXCLUSIVE IN NATURE IN AS MUCH THEY CAN ONLY BE AVAILED BY MEMBE R OF STOCK EXCHANGE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN ACCEPTING THE ARGUMENT THAT THESE ARE MERE REIMBURSEMENTS WHEN THE POSITION IN LAW IS VERY CLE AR THAT DETERMINING AN INCOME COMPONENT IN A SPECIFIC PAYME NT AND THEN DEDUCTING TDS WOULD RENDER THE ENTIRE CONCEPT OF WI THHOLDING TAX DIFFICULT TO APPLY AND THAT TDS HAS TO BE DEDUCTED ON GROSS PAYMENTS. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN IGNORING THE FACTS THAT USE OF TEC HNOLOGY AND PAGE 14 OF 16 ALGORITHMIC BASED PROGRAMS HAVE CONVERTED AN ERSTWH ILE PHYSICAL MARKET INTO A DIGITALLY OPERATED MARKET. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN IGNORING THE FACT THAT THE SERVICE S RENDERED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELOPED TO CAR TO THE NEEDS OF THE BROKER COMMUNI TY TO FACILITATE TRADING. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) HAS OVERLOOKED THE FACT THAT THE BROKERS HA VE IN SUBSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMENTS AND THAT THERE IS NO REASON TO GIVE A DIFFERENT TREATME NT IN THIS YEAR. 37. LEARNED REPRESENTATIVES AGREE THAT THE ISSUE RA ISED IN GROUND NOS.4 TO 9 IS COVERED BY THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. ANGEL BROKING LTD (35 SOT 457). RESPECTFULLY FOLLO WING THE SAME, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT (A). THIS G ROUND IS THUS DISMISSED. 38. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . 39. GROUND NO.1 OF THE ASSESSEES APPEAL RELATES TO DEPRECIATION ON BOMBAY STOCK EXCHANGE CARD OF ` .24,60,938. THIS GROUND WAS NOT PRESSED, THEREFORE, SAME IS DISMISSED AS NOT PRESSED. 40. IN SECOND GROUND OF APPEAL, THE ASSESSEE HAS RA ISED THE FOLLOWING GRIEVANCE: THE LD CIT(A) GROSSLY ERRED IN LAW AS WELL AS ON T HE FACTS AND CIRCUMSTANCES IN HOLDING AND CONFIRMING THE ACTION OF AO IN HOLDING A SUM OF ` .48,87,150 AS LOAN AND ADVANCES FOR DEBTS DUE UNDER REGULAR BUSINESS ACTIVITY OF SHARES TRANSACTI ON FROM A COMPANY WHERE ASSESSEE IS HAVING SHAREHOLDING EXCEE DING 25% AS DEEMED DIVIDEND INCOME BY INVOKING THE PROVISION S OF SECTION 2(22) (E) OF THE I.T.ACT, 1961 WHICH IS NOT JUSTIFIED HENCE IT IS REQUIRED TO BE DELETED. 41. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THA T FOLLOWING REMARK WAS GIVEN IN THE AUDIT REPORT: ADVANCES IN THE NATURE OF LOAN(INTEREST FREE) TAKE N FROM COMPANY UNDER THE SAME MANAGEMENT IS AS UNDER: PAGE 15 OF 16 GSB SECURITIES PVT.LTD., ` .NIL(P.Y ` . NIL) AND MAXIMUM AMOUNT DUE AT A TIME DURING THE YEAR ` .92,80,861.74 (P.F.RS.16,00,000.00) 42. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSE SSEE HELD 25.90% OF SHAREHOLDING OF GSB SECURITIES PVT LTD., AND, THAT THE ABOVE TRANSACTION WAS COVERED BY THE SCOPE OF DEEMED DIVIDEND UNDER SECTI ON 2(22)(E) OF THE ACT. THE ASSESSEEE EXPLANATION THAT THE TRANSACTION WIT H GSB SECURITIES WERE IN THE NATURE OF BUSINESS TRANSACTIONS, AND, ACCORDING LY, NOT HIT BY SECTION 2(22)(E) WAS REJECTED. IT WAS SO DONE MAINLY ON TH E GROUND THAT AUDITOR HAS TERMED THE SAME, AS EVIDENT FROM NOTE NO.15 TO NOTE S TO ACCOUNTS IN SCHEDULE J, AS LOAN TRANSACTION. THE ASSESSING OFF ICER ALSO NOTED THAT THE GSB SECURITIES HAD SUFFICIENT ACCUMULATED RESERVES AND SURPLUS SO AS TO ATTRACT THE ABOVE LOAN AS DEEMED DIVIDEND. AN ADDITION OF ` .48,87,150 WAS ACCORDINGLY MADE TO THE RETURNED INCOME. AGGRIEVED , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. 43. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 44. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 45. WE FIND THAT THE AUTHORITIES BELOW HAVE TREATED THE ASSESSEES TRANSACTION WITH GSP SECURITIES AS LOAN TRANSACTION PRIMARILY ON THE GROUND THAT IT WAS SO TREATED BY THE AUDITORS IN THEIR REM ARK. HOWEVER, NEITHER THERE ANY SUCH MENTION IN THE AUDITORS REMARK NOR IS THERE ANY DOUBT, AFTER PERUSING THE LEDGER ACCOUNT WITH GSB SECURITIES, T HAT ALL THESE TRANSACTIONS ON ACCOUNT OF WHICH THE BALANCE WAS SHOWN IN THE NA ME OF GSP SECURITIES AND THE ASSESSEE IN THE NATURE OF BUSINESS TRANSACT ION OF SHARES. THERE IS NO DISPUTE ON THE FUNDAMENTAL LEGAL PROVISION THAT IT IS ONLY WHEN PAYMENT IS MADE BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER T HAT THE PROVISIONS OF SECTION 2(22)(E) ARE ATTRACTED. NOT ONLY THAT THER E IS NO PAYMENT IN THE PRESENT CASE AS TRANSACTIONS ARE IN RESPECT OF PURC HASE OF SHARES AND SECURITIES, AND AMOUNTS DUE TO THE ASSESSEE ARE REF LECTED BY NET OF SUCH DEBITS, THE TRANSACTIONS ARE NOT IN THE NATURE OF P AYMENTS FOR LOANS AND PAGE 16 OF 16 ADVANCES. WE HAVE PERUSED THE LEDGER ACCOUNT OF GS B SECURITIES AND WE ARE SATISFIED THAT THERE ARE NO PAYMENTS BY WAY OF LOAN S AND ADVANCES TO THE ASSESSEE. IN FACT, WE DID ASK THE LEARNED DEPARTME NTAL REPRESENTATIVE, DURING THE COURSE OF HEARING, TO POINT OUT SUCH PAY MENTS BY WAY OF LOANS AND ADVANCES TO THE ASSESSEE, AND EVEN HE COULD NOT IDE NTIFY SUCH TRANSACTIONS. HIS PLEA WAS THAT EVEN DUES ON ACCOUNT OF SALES SHO ULD BE COVERED BY SECTION 2(220(E), BUT THIS PLEA IS CLEARLY CONTRARY TO UNAM BIGUOUS LEGAL PROVISIONS. THE VERY FOUNDATION OF THE IMPUGNED ADDITION IS THE REFORE DEVOID OF LEGALLY SUSTAINABLE MERITS INASMUCH AS WHAT HAS BEEN TREATE D AS LOAN TRANSACTION BY THE AUTHORITIES BELOW IS CLEARLY BUSINESS TRANSACTI ON IN NATURE. WE, THEREFORE, DEEM IT FIT AND PROPER TO UPHOLD THE GRI EVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 46. THIS GROUND IS THUS ALLOWED. 47. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED TODAY ON THIS 27 TH DAY OF APRIL, 2011. SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR.) ACCOUNTANT MEMBER MUMBAI; APRIL 27, 2011 PARIDA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4 , MUMBAI 4. THE COMMISSIONER (APPEALS) IV , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - G BENCH, MUMBA I 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI