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

ITA 4534/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49554 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: D V LAKHANI
• Keywords: Bad and doubtful debts

Judgement Text

1 ITA 4534 /M/2010 ANGEL CAPITAL AND DEBT MARKET LTD.. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI R.K. PANDA, A.M. ITA NO. 4534/MUM/2010 ASSESSMENT YEAR 2007-08 ANGEL CAPITAL AND DEBT MARKET LTD., G-1, AKRUTI TRADE CENTER, ROAD NO. 7, MIDC, ANDHERI (EAST), MUMBAI 400093. PAN AAACS 6308J VS. DCIT RANGE 4(1), 640 AAYAKAR BHAWAN, M.K. MARG, MUMBAI 20. APPELLANT RESPONDENT APPELLANT BY SHRI D.V. LAKHANI RESPONDENT BY SHRI P.K.B. MENON DATE OF HEARING 27.7.2011 DATE OF PRONOUNCEMENT ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DT. 03.05.2010 OF CIT(A)- 8, MUMBAI RELATING TO A.Y. 2007-08. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE RE ADS AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ISALLOWING BAD DEBTS/BUSINESS LOSS OF ` 6,497,804/-. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE AND STOCK BROKING AND HAD CLAIMED AN AMOUN T OF ` 70,61,083/- AS BUSINESS LOSS INCLUDING BROKERAGE OF ` 5,63,279/- IN ITS PROFIT & LOSS ACCOUNT 2 ITA 4534 /M/2010 ANGEL CAPITAL AND DEBT MARKET LTD.. AND HAS ALSO SHOWN A RECOVERY OF BUSINESS LOSS OF ` 19,27,422/-. FROM THE DETAILS OF BAD DEBT SUBMITTED BY THE ASSESSEE, THE A.O. NOTED THAT AN AMOUNT OF ` 5,63,279/- IS ON ACCOUNT OF BROKERAGE EARNED BY TH E ASSESSEE WHICH SATISFIES THE CONDITIONS LAID DOWN U/S 36(2). THE BALANCE AMOUNT OF ` 64,97,804/- DOES NOT SATISFY THE CONDITIONS LAID DO WN IN SECTION 36(2). THIS WAS CLAIMED AS BUSINESS LOSS. HE NOTED THAT THE AM OUNTS CLAIMED AS BAD DEBTS PERTAINED TO FINANCIAL YEAR 2005-06 AND FINAN CIAL YEAR 2006-07. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE A.O. DISALLOWED AN AMOUNT OF ` 64,97,804/-. IN APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE A.O. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE SIDES, WE FIND THE ISSUE INVOLVED HERE IS ALLOWABILITY OF BAD DEBT IN CASE OF A SHARE BROKER. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR. WE FIND THE TRIBUNAL VIDE ITA NO. 4 693/M/2009 ORDER DT. 23.7.2010 HAD ALLOWED THE CLAIM OF THE ASSESSE BY H OLDING AS UNDER:- WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MA TERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. THE AFORESAID ISSUE IN THIS APPEAL HAS COME UP FOR CONSIDERATION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. SHREYAS S. MO RAKHIA (ITA NO. 3374/MUM./2004, A.Y. 1998-99. THE SPECIAL BENCH, V IDE ORDER DATED 16 TH JULY, 2010 WAS HELD THAT THE AMOUNT RECEIVABLE BY A SHARE BROKER FROM HIS CLIENTS IN RESPECT OF TRANSACTIONS IN SHARES IS A TRADING DEBT AND, ACCORDINGLY, ELIGIBLE FOR DEDUCTI ON AS SUCH. IT IS ALSO SETTLED IN LAW, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT, [1010-TIOL-15-SC] THAT THE BAD DEBTS ARE TO BE ALLOWED AS DEDUCTION IN THE YEAR IN WHICH THE BAD D EBTS ARE ACTUALLY WRITTEN. IN VIEW OF THESE BINDING JUDICIAL PRECEDE NTS, OBJECTIONS RAISED BY THE AUTHORITIES ARE INDEED UNSUSTAINABLE IN LAW. FOR THE REASONS SET OUT ABOVE, AND RESPECTFULLY FOL LOWING HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF TRF LTD. (S UPRA) AND SPECIAL BENCH DECISION IN THE CASE OF SHREYAS S. MO RAKHIA (SUPRA), WE DELETE THE IMPUGNED DISALLOWANCE. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 3 ITA 4534 /M/2010 ANGEL CAPITAL AND DEBT MARKET LTD.. 5. R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR AND IN A BSENCE OF ANY DISTINGUISHABLE FEATURE BROUGHT BEFORE US BY THE LD . D.R., THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPENING COURT AT THE TIME O F HEARING I.E. ON 27.07.2011. SD/- SD/- (D.K. AGARWAL) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 27.7.2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 8, MUMBAI 4. THE CIT--4. MUMBAI 5. THE DR BENCH, A 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 4534 /M/2010 ANGEL CAPITAL AND DEBT MARKET LTD.. DATE INITIALS 1 DRAFT DICTATED ON 27.7.11, SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 27.7.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER