Appeal details
Counselvise Citation
[2010] 119 COUNSELVISE.COM (IT) 6360 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-11-2010
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
H
Next Hearing Date
28-10-2010
Assessment Year
2006-2007
Appeal Filed On
12-08-2009
Judgement Text
1 ITA 4720/M/09, BRICS SECURITIES LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SMT. ASHA VIJAYAR AGHAVAN, JM ITA NO. 4720/MUM/09 ASSESSMENT YEAR 2006-07 M/S BRICS SECURITIES LIMITED, SADHANA HOUSE, IST FLOOR, 570 P.B. MARG, BEHIND MAHINDRA TOWERS, WORLI, MUMBAI 18. PAN AAACB 4908R VS. DCIT 4(1), AAYAKAR BHAWAN, MUMBAI. 20 PAN AABCB1857G APPELLANT RESPONDENT APPELLANT BY SHRI R.V. CHANIYARI RESPONDENT BY SHRI MANOJ MISHRA ORDER PER P.M. JAGTAP, A.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED BY THE ORD ER OF THE LD. CIT(A) IV, MUMBAI DATED 10.7.09 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF BAD DEBTS TO THE EXTENT OF ` 12,79,931/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF SHARE BROKING AND DEALING IN SHARES AND SECURITIES AS A MEMBER OF BSE AND NSE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 27.11.06 DECLARING TOTAL INCOME OF ` 10,40,78,400/-. IN THE P&L ACCOUNT FILED ALONG WI TH THE SAID RETURN, A SUM OF ` 12,80,000/- WAS DEBITED BY THE ASSESSEE COMPANY ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE SAID DEBT REPRESENTED AMOUNT RECE IVABLE BY THE ASSESSEE COMPANY FROM HIS CLIENTS AGAINST THE PURCHASE OF SHARES MADE ON THEIR BEHALF IN THE CAPACITY OF SHARE 2 ITA 4720/M/09, BRICS SECURITIES LTD. BROKER. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS E XAMINED BY THE A.O. AND ON SUCH EXAMINATION, HE DISALLOWED THE SAME MAINLY ON THE G ROUND THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THAT THE CONCERNE D DEBTS HAVE ACTUALLY BECOME BAD DURING THE YEAR UNDER CONSIDERATION AND THE CONDITION STIP ULATED U/S 36(2) WAS ALSO NOT SATISFIED. ON APPEAL, THE LD. CIT(A) DID NOT AGREE WITH THE FI RST REASON GIVEN BY THE A.O. IN VIEW OF THE DECISION OF HONBLE BOMBAHY HIGH COURT IN THE C ASE OF OMAN INTERNATIONAL BANK [2009] 313 ITR 128 WHEREIN IT WAS HELD THAT AFTER T HE AMENDMENT MADE IN THE PROVISIONS OF SECTION 36(1)(VII) IT WAS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBTS WRITTEN OFF BY IT HAD ACTUALLY BECOME BAD. HE, HOW EVER, AGREED WITH THE SECOND REASON GIVEN BY THE A.O. THAT THE ASSESSEE COMPANY HAVING TAKEN INTO ACCOUNT ONLY THE BROKERAGE AMOUNT FOR COMPUTING ITS TOTAL INCOME, CO NDITION STIPULATED IN SECTION 36(2) WAS SATISFIED ONLY TO THE EXTENT OF BROKERAGE AMOUN T AND NOT IN RESPECT OF THE BALANCE AMOUNT OF DEBTS AMOUNTING TO ` 12,79,931/-. ACCORDINGLY, THE DISALLOWANCE OF ` 12,80,000/- MADE BY THE A.O. ON ACCOUNT OF BAD DEBT S WRITTEN OFF WAS SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF ` 12,79,931/-. AGGRIEVED BY THE ORDER OF THE LD. CI T(A), THE ASSESSEE PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE S AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ISSUE I NVOLVED IN THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F SPECIAL BENCH OF ITAT AT MUMBAI IN THE CASE OF DCIT VS. SHREYAS S. MORAKHIA 131 TTJ 64 1 WHEREIN IT HAS BEEN HELD THAT THE `AMOUNT RECEIVABLE BY THE ASSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIENTS AGAINST THE TRANSACTIONS OF PURCHASE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. IT WAS ALSO HELD THAT THE BROKERAGE/COMMISSION INCO ME ARISING FROM SUCH TRANSACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR OR ANY EARLI ER YEAR, IT SATISFIES THE CONDITION STIPULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 36(1)(VII) BY 3 ITA 4720/M/09, BRICS SECURITIES LTD. WAY OF BAD DEBTS AFTER HAVING WRITTEN OF THE SAID D EBTS IN HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. WE, THEREFORE, SET ASIDE THE IMPUGNE D ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSES SEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS AFTER ASCERTAINING THE EXACT QUANTUM THEREOF TAKING INTO CONSIDERATION THE MARGIN MONEY OR VALUE OF SHARES, IF ANY, AVAILABLE WITH TH E ASSESSEE AS SECURITY. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALL OWED AS INDICATED ABOVE. ORDER PRONOUNCED ON 26 TH NOVEMBER, 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) ( P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 26 TH NOVEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -IV - MUMBAI 4. THE CIT- 4 MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA 4720/M/09, BRICS SECURITIES LTD. DATE INITIALS 1. DRAFT DICTATED 26.10.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 2.11.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.
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