SVV SHARES & STOCK BROKERS P. LTD, MUMBAI V. ITO 4(2)(2), MUMBAI

ITA 558/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3853 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 09-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 27-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A.NO.558/MUM/2009 - A.Y 2004-05 SHREE SVV SHARES & STOCK BROKERS PVT.LTD., A-1 NAVJEEVAN SOCIETY, 121/127 KAZI SAYED STREET, MUMBAI 400 003. PAN: AABCS 5549 Q VS. DY. COMMISSIONER OF I.T., CENTRAL CIRCLE 32, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH R. MODY. RESPONDENT BY : SHRI D.SONGATE. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BU T THE ONLY DISPUTE IS REGARDING DISALLOWANCE OF BAD DEBTS AMOU NTING TO ` `` ` .9,95,461/-. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE BAD DEBT WAS MAINLY DISALLOWED BY THE AO BECAUSE CONDITIONS OF S .36(2) WERE NOT FULFILLED AND NO EFFORTS WERE MADE BY THE ASSESSEE TO RECOVER THE SAME. 3. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT AFTER THE AMENDMENT TO SEC.36(1)(VII) W.E.F. 1-4-1989 IT IS N O MORE A REQUIREMENT OF LAW THAT IT SHOULD BE PROVED THAT TH E DEBT HAS REALLY BECOME BAD. MERELY WRITING OFF OF THE SAME IS SUFFI CIENT. IN THIS REGARD HE RELIED ON THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF 2 TRF LTD. VS. CIT 323 ITR 397. AS FAR AS REQUIREMENT OF SEC.36(2) IS CONCERNED, THIS ISSUE HAS BEEN RECENTLY DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. SHRI SHR EYAS S.KORAKHIA I.T.A.NO.3374/MUM2004 DATED 16 TH JULY, 2010. 4. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL OF THE ASSE SSEE. THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT [SUPR A] HAS OBSERVED AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD D EBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE SUPREME COURT ACCORDINGLY REMANDED THE MATTER T O THE ASSESSING OFFICER TO EXAMINE, SOLELY TO THE EXTENT OF WRITE OFF, WHET HER THE DEBT OR PART THEREOF WAS WRITTEN OFF IN ACCOUNTS OF THE ASSESSEE. SINCE IN THE CASE BEFORE US THE DEBT HAS ALREADY BE EN WRITTEN OFF, THEREFORE, THERE WAS NO NEED TO PROVE THAT SAME HAS REALLY BECOME BAD. 6. AS FAR AS THE ASPECT OF COMPLIANCE OF SEC.36(2) IS SONCERNED, THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY . CIT VS. SHRI SHREYAS S.KORAKHIA [SUPRA] HAS HELD HELD AS UNDER: 32. KEEPING IN VIEW ALL THE FACTS OF THE CASE AND THE LEGAL POSITION EMANATING FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE AMOUNT RECEIVABL E 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. THE BROKERAGE/COMMISSION INCOME ARISING FROM SUCH TRANSACTIONS VERY MUCH FORMS PART OF THE SAID DEBT AND WHEN THE 3 AMOUNT OF SUCH BROKERAGE/COMMISSION HAS BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVA NT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITION STI PULATED IN SECTION 36(2)(I) AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.36(1)(VII) BY WAY OF BAD DEBTS AFTER HAVING WRITTEN OF THE SAID DEBTS FROM HIS BOOKS OF ACCOUNT AS IRRECOVERABLE. WE, THEREFORE, ANSWER THE QUESTION REFERRED TO THIS SPECIAL BENCH IN THE AFFIRMATIVE THAT IS IN FAVOUR OF THE ASSESSEE. FOLLOWING THE ABOVE DECISION, WE ARE OF THE VIEW TH AT THE BAD DEBT SHOULD BE ALLOWED AND, THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT[A] AND DIRECT THE AO TO ALLOW THE BAD DEBT. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF NOVEMBER, 2010. SD/- SD/- (V.DURGA RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 19 TH NOVEMBER, 2010. P/-*