THE ACIT CIR 4(2), MUMBAI V. M/S. ROSY BLUE SECURITIES P. LTD, MUMBAI

ITA 4762/MUM/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6306 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-09-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL
• Assessee Lawyers: P P BHANDARI
• Keywords: Depreciation; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4762/MUM/2007 (ASSESSMENT YEAR: 2004-05) ACIT, CIRCLE - 4(2) M/S. ROSY BLUE SECURITES P. LTD . ROOM NO. 642, 6TH FLOOR 154-C, MITTAL COURT, NARIMA N POINT AAYAKAR BHAVAN, M.K. ROAD VS. MUMBAI 400021 MUMBAI 400020 PAN - AAACR 4082 Q APPELLANT RESPONDENT APPELLANT BY: DR. B. SENTHIL RESPONDENT BY: SHRI P.P. BHANDARI O R D E R PER B. RAMAKOTAIAH, A.M. IN THIS APPEAL REVENUE HAS RAISED SIX GROUNDS OUT O F WHICH GROUND NO. 1 PERTAINS TO THE ISSUE OF DEPRECIATION ON BOMBAY S TOCK EXCHANGE CARD ALLOWED BY THE CIT(A). GROUND NOS. 2 TO 4 PERTAIN T O CLAIM OF BAD DEBT WRITTEN OFF BY THE ASSESSEE AND ALLOWED UNDER SECTI ON 36(1)(VII). GROUND NOS. 5 & 6 ARE GENERAL IN NATURE. 2. AT THE OUTSET IT WAS SUBMITTED THAT THE ISSUE OF DE PRECIATION ON MEMBERSHIP CARD OF BSE HAS BEEN CONSIDERED IN ITAT ORDER IN THE CASE OF M/S. TECHNO SHARES & STOCKS LTD. VS. ITO 101 TTJ (M UMBAI) 349 RELIED UPON BY THE CIT(A) AND IT WAS UPHELD BY THE HON'BL E SUPREME COURT IN TECHNO SHARES & STOCKS LTD 327 ITR 32(SC). CONSIDER ING THAT THE CIT(A) HAS FOLLOWED THE ITAT ORDER WHEREIN IT WAS HELD THA T BSE CARD IS AN INTANGIBLE ASSET WITHIN THE MEANING OF SECTION 32(1 ) AND IS ENTITLED FOR DEPRECIATION, WHICH PRINCIPLE WAS UPHELD BY THE HON 'BLE SUPREME COURT IN THE ABOVE REFERRED CASE, THE ORDER OF THE CIT(A) I S TO BE UPHELD AND THE REVENUES GROUND IS REJECTED. 3. GROUND NOS. 2 TO 4 PERTAIN TO THE ISSUE OF BAD DEBT AND FOLLOWING THE PRINCIPLES ESTABLISHED BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. M/S. OMAN INTERNATIONAL BANK SAOG 100 ITD 285 (SB) (MUM) THE CIT(A) HAS ALLOWED THE DEDUCTION. REVENUE IS CONTESTING THAT I T IS TO BE TAKEN AS A ITA NO. 4762/MUM/2007 M/S. ROSY BLUE SECURITES P. LTD. 2 BUSINESS LOSS AND THAT LOSS HAD NOT CRYSTALLISED DU RING THE FINANCIAL YEAR. ON THIS ISSUE ALSO IT WAS SUBMITTED THAT THE CLAIM OF BAD DEBTS/LOSS BY THE STOCK BROKER HAS BEEN CONSIDERED BY THE SPECIAL BENCH IN THE CASE OF DCIT VS. SHREYAS S. MORAKHIA (MUM) (SB) 5 ITR TRIB.1 WHEREIN IT WAS HELD AS UNDER: - HELD, THAT THE AMOUNT RECEIVED BY THE ASSESSEE, A SHARE BROKER, FROM HIS CLIENTS AGAINST TRANSACTIONS OF PURCHASE OF SHA RES ON THEIR BEHALF CONSTITUTED A TRADING DEBT. THE BROKERAGE INCOME AR ISING FROM SUCH TRANSACTIONS VERY MUCH FORMED PART OF THE DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE HAD BEEN TAKEN INTO ACCOUNT IN COMPU TATION OF INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR OR ANY E ARLIER YEAR, IT SATISFIED THE CONDITION STIPULATED IN SECTION 36(2)(I) AND TH E ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(VII) BY WAY OF BAD DEBTS AFTER HAVING WRITTEN OFF THE SAID DEBTS FROM HIS BOOKS AS IRRECO VERABLE 4. IN VIEW OF THE DECISION OF THE SPECIAL BENCH WE ARE OF THE OPINION THAT THE ISSUE REQUIRES RE-EXAMINATION BY THE A.O. TO FI ND OUT WHETHER THE FACTS OF THE CASE ARE COVERED BY THE ABOVE SPECIAL BENCH DECISION AND IF SO THE A.O. IS DIRECTED TO ALLOW THE SAME. WITH THIS DIREC TION THE ISSUE IS RESTORED TO THE FILE OF THE A.O. FOR EXAMINING THE FACTS AND DE CIDE THE ISSUE ACCORDINGLY. IN THE RESULT GROUND NOS. 2 TO 4 ARE CONSIDERED ALL OWED. 5. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2010. SD/- SD/- (N.V. VASUDEVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.