DCIT RG 4(1), MUMBAI V. IDBI CAPITAL MARKET SERVICES LTD, MUMBAI

ITA 419/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71183 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 15-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N C JAIN
• Assessee Lawyers: O P SINGH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI ! ! ! ! !'##%&' ( ) ) ) ) BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K.BILLAIYA , AM ./ I.T.A. NO. 419 /MUM/2011 ( ' * ' * ' * ' * +* +* +* +* / ASSESSMENT YEAR : 2007-08) ACIT, CIRCLE-4(1), 6 TH FLOOR, ROOM NO.640, AAYAKAR BHAVAN, MUMBAI-400020 ' ' ' ' / VS. M/S. IDBI CAPITAL MARKET SERVICES LTD. 5 TH FLOOR, MAFATLAL CENTRE, NARIMAN POINT, MUMBAI-400021 , ( ./ PAN : AAACI1268F ( ,- / APPELLANT ) .. ( ./,- / RESPONDENT ) 0 1 / REVENUE BY : SHRI O.P.SINGH ,- 0 1 / APPELLANT BY : SHRI N.C.JAIN ' 0 2( / DATE OF HEARING : 05-09-2013 34+ 0 2( / DATE OF PRONOUNCEMENT : 18 -09-2013 5 / O R D E R PER N.K. BILLAIYA, AM: IN THIS APPEAL, REVENUE HAS CHALLENGED THE CORRECTN ESS OF THE ORDER OF THE CIT(A)-10, MUMBAI DATED 22.10.2010, PERTAINING TO A .Y. 2007-08. REVENUE HAS RAISED THREE SUBSTANTIVE GROUNDS OF APPEAL. GR OUND NO. 1 RELATES TO THE DELETION OF THE ADDITION OF RS.10,45,427/- MADE IN RESPECT OF MARK TO MARKET LOSS OF OPEN INTEREST IN DERIVATIVE TRANSACTIONS AT THE END OF THE YEAR. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVES TMENT, SHARE BROKING AND GOVERNMENT SECURITIES AND IS MEMBER OF BOMBAY S TOCK EXCHANGE AS WELL 2 ITA NO.419/MUM/2011 IDBI CAPITAL MARKET SERVICES LTD. AS NATIONAL STOCK EXCHANGE. DURING THE COURSE OF S CRUTINY ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN MARK TO MARKET PROVISION OF DERIVATIVE TRANSACTIONS AT THE END OF THE YEAR AMOUNTING TO RS.2,81,588/- IN DERIVATIVE (F & O) TRADING. ACC ORDING TO THE AO, THIS WAS A NOTIONAL LOSS CLAIMED BY THE ASSESSEE AND DESERVE T O BE DISALLOWED AND ACCORDINGLY DISALLOWED THE MARKED TO MARKET LOSS. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ). THE CIT(A) RELYING UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF WOODWARD GOVERNOR 312 ITR 254 HELD THAT LOSS SUFFERED BY TH E ASSESSEE IS THE ITEM OF EXPENDITURE AND ALLOWED THE APPEAL OF THE ASSESSEE . AGGRIEVED BY THIS, REVENUE IS BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BANK OF BAHRAIN AND KU WAIT 41 SOT 290 (SB) AND SUBMITTED THAT MARK TO MARKET LOSS ON DERIVATIV E TRADING IS ALLOWABLE EXPENDITURE. THE LD. DR SUPPORTED THE ASSESSMENT O RDER. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE C ASE OF BANK OF BAHRAIN AND KUWAIT (SUPRA). WE FIND THAT THE SPECIAL BENCH AT PARA 58, HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT AND ALLOWED A SSESSEES CLAIM. FACTS AND CIRCUMSTANCES ARE BEING IDENTICAL, RESPECTFULLY FOLLOWING THE DECISIONS OF THE SPECIAL BENCH AND THE HONBLE SUPREME COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). GROU ND 1 IS ACCORDINGLY DISMISSED. 6. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF V SAT, LEASELINE AND TRANSACTIONS CHARGES U/S 40(A)(IA). THE AO OBSERVE D THAT THE ASSESSEE HAS DEBITED FOLLOWING EXPENSES:- 1. BSE CHARGES RS. 679245 2. NSDL CHARGES RS. 674931 3 ITA NO.419/MUM/2011 IDBI CAPITAL MARKET SERVICES LTD. 3. NSE CHARGES RS. 3643355 4. VSAT CHARGES RS. 130356 5. TRANSACTION CHARGES RS. 2271054 TOTAL RS. 7398941 THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE H AS FAILED TO DEDUCT TAX ON AFOREMENTIONED PAYMENT, THE ENTIRE AMOUNT IS TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT AND ACCORDINGLY DISALLOWED THE SAME. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) WAS OF THE OPI NION THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF KOTA K SECURITIES LTD 25 SOT 440, MUMBAI AND DELETED THE ENTIRE ADDITION. 7. THE REVENUE IS AGGRIEVED BY THIS FINDING OF THE CIT(A). THE LD. COUNSEL FOR THE ASSESSEE ONCE AGAIN RELIED UPON THE DECISION OF THE TRIBUNAL IN KOTAK SECURITIES LTD(SUPRA) AND SUBMITTED THAT THE DECISI ON OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT. WE HAVE THE BENEFIT OF THE ORDER OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD IN ITA NO. 3111/2009 EXHIBITED ON PAGE 23 TO 41 OF THE PAPER BOOK. WE FIND THAT THE CIT(A) HAS RIGHTLY FOLLOWED THE DECISION IN THE CASE OF KOTAK SECURITIES LTD. IN DELETING THE ADDITIONS. WE THEREFORE, D0 NOT FI ND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). GROUND NO. 2 IS ACCORDI NGLY DISMISSED. 8. GROUND 3 RELATES TO THE DELETION OF THE ADDITION OF RS.2,77,813/- ON ACCOUNT OF DEPRECIATION ON BSE MEMBERSHIP CARD. ON FINDING THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.2,77,813/- ON BOMBAY STOCK EXCHANGE CARD, THE AO ASKED THE ASSESSEE TO EXPLAI N WHY DEPRECIATION SHOULD NOT BE DISALLOWED. THE AO WAS OF THE VIEW THAT THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TECHNO SHA RES & STOCK LTD. SQUARELY APPLY ON THE FACTS OF THE CASE AND ACCORDI NGLY DISALLOWED THE CLAIM OF DEPRECIATION. 9. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ). THE CIT(A) FOUND THAT THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F TECHNO SHARES & STOCK 4 ITA NO.419/MUM/2011 IDBI CAPITAL MARKET SERVICES LTD. LTD. (SUPRA) HAS BEEN REVERSED BY THE HONBLE SUPRE ME COURT IN 327 ITR 323. ACCORDINGLY, CIT(A) DIRECTED THE AO TO ALLOW THE CL AIM OF DEPRECIATION. 10. BEFORE US, THE LD. DR STRONGLY SUBMITTED THAT T HE BSE CARD HAS CEASED TO EXIST AFTER DEMUTUALIZATION. THEREFORE, THE VAL UE OF CARD HAS BECOME NIL. THE COUNSEL FOR THE ASSESSEE STATED THAT THE BSE CA RD IS VERY MUCH IN EXISTENCE AND ENTITLED FOR DEPRECIATION. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. SINCE THE BSE HAS ALLOWED SHARES IN LIEU OF MEMBERS RIGHTS ON DEMUTUALIZATION, THE DEPRECIATIO N ON THE BSE CARD IS OUGHT TO BE DISALLOWED. ACCORDINGLY, GROUND NO. 3 IS ALLOWED. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/09 /2013 5 0 34+ ( 6'78 /09/2013 , 4 0 9 SD/- (VIJAY PAL RAO) SD/- (N.K.BILLAIYA) / JUDICIAL MEMBER ( / ACCOUNTANT MEMBER MUMBAI; 6' /DATED : 18 TH SEPTEMBER, 2013. SHEKHAR. P.S. 5 5 5 5 0 00 0 .2 .2.2 .2: : : : ;+2 ;+2 ;+2 ;+2 / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. < ( ) / THE CIT- , MUMBAI. 4. < / CIT(A)- , MUMBAI 5 ITA NO.419/MUM/2011 IDBI CAPITAL MARKET SERVICES LTD. 5. =9 .2' , , / DR, ITAT, MUMBAI 6. 9>* ? / GUARD FILE. 5' 5' 5' 5' / BY ORDER, /2 .2 //TRUE COPY// @ @@ @ / A A A A (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI