OPTIMA SECURITIES INDIA P. LTD, MUMBAI V. ACIT CIR 4(2),

ITA 560/MUM/2009

• Counselvise Citation: 56019914 RSA 2009
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 28-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G P TRIVEDI
• Keywords: Bad and doubtful debts
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, MUMBAI. BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.560/ MUM/2009 ASSESSMENT YEAR: 2004-05 OPTIMA SECURITIES INDIA PVT LTD. .. APPELLANT C/O. M/S. GANDHI ASSOCIATES, CA, 2 ND FLOOR, VOLTAS INTERNATIONAL HOUSE, 28, G N VAIDYA MARG, FORT, MUMBAI-400001 PA NO.AAACO 1911B VS ACIT, CIRCLE 4(2) .. RESPONDEN T MUMBAI. APPEARANCES: VIPUL JOSHI, FOR THE APPELLANT G.P.TRIVEDI , FOR THE RESPONDENT DATE OF HEARING : 28.7.2011 DATE OF PRONOUNCEMENT : 30 -09-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED INTO Q UESTION CORRECTNESS OF CIT(A)S ORDER DATED 1 ST DECEMBER, 2008, IN THE MATTER OF ASSESSMENT UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS: I.T.A NO.560/ MUM/2009 ASSESSMENT YEAR: 2004-05 2 1. (A) THE CIT(A) ERRED IN NOT ALLOWING CLAIM OF B AD DEBT OF RS.961.150 DESPITE HOLDING THAT IN CASE OF SHARE BROKER THE AMOUN T OF BROKERAGE IS REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF SECTION 36(1)(VII) AND SECTION 36(2) OF THE ACT. (B) THE CIT(A) ERRED IN NOT ADEQUATELY CONSIDERING T HE FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN IT WAS UNDISPUTED THAT THE IMPUGNED AMOUNT OF BAD DEBT OF RS.961,150 COMPRISED OF BROKERA GE AMOUNT WHICH HAS BEEN OFFERED FOR TAX IN THE EARLIER YEARS. II. (A) WITHOUT PREJUDICE TO THE ABOVE GROUND OF A PPEAL, THE CIT(A) ERRED IN NOT ALLOWING UNDER SECTION 2 8 OF THE ACT, THE IMPUG NED AMOUNT OF RS.961,150 BEING LOSS SUFFERED BY THE APPELLANT DURING THE PREVIO US YEAR. (B) THE CIT(A) ERRED IN NOT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE RIGHT PERSPECTIVE WHEREIN IT WAS UNDISPUTED THAT THE IMPUGNED LOSS HAD ARISEN DURING THE PREVIOUS YEAR. III(A) WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF AP PEAL, THE CIT(A) ERRED IN NOT ALLOWING THE AMOUNT OF RS.961,150 ON THE GROUND THAT THE IMPUGNED DEBT HAS NOT BECOME BAD. (B) THE CIT(A) FURTHER ERRED IN HOLDING THAT THE AP PELLANT HAD CLOSE RELATIONSHIP WITH THE PARTY WHOSE BALANCE WAS WRITTEN OFF DESPITE THE FACT THAT THERE IS NO SUCH RELATIONSHIP EXCEPT ARMS LENGTH BUSINESS RELATIONSHIP. (C) IT IS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE IMPUGNED DEBT HAVING BECOME BAD SHOULD HAVE BEEN ALL OWED AS A DEDUCTION. 2. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE IMPU GNED DISALLOWANCE OF RS.9,61,150 IN RESPECT OF BAD DEBT. THE ASSESSMENT YEAR I NVOLVED IS 2004-05 AND THE IMPUGNED ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME T AX ACT, 1961. 3. TO ADJUDICATE UPON THE ABOVE GRIEVANCE, ONLY A F EW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN BUSINESS OF BROK ING AND TRADING IN SECURITIES. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS MADE A CLAIM FOR DEDUCTION OF BAD DEBTS AMOU NTING TO RS.9,61,150 BUT DECLINED THE SAME AS THE ASSESSEE HAS NOT ESTABLISHED THAT AMOUNT HAS ACTUALLY BECOME BAD. THE AO DECLINED TO ALLOW SPECIAL BENCH DECISION IN THE CASE OF OMAN INTERNATIONAL BANK (100 ITD(SB) 285) ON THE GROUND THAT THE SAME IS IN CHALLENGED BEFORE HONBLE BOMBAY HIGH COURT. IN APPEAL, CIT(A ) UPHELD THIS ACTION ON THE GROUND THAT HONBLE MADRAS HIGH COURT, IN THE CASE OF CIT VS. SOUTH INDIA SURGICAL I.T.A NO.560/ MUM/2009 ASSESSMENT YEAR: 2004-05 3 CO.LTD., 287 ITR 61, AND SOME OTHER HONBLE HIGH COU RTS HAVE HELD THAT IT IS NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT HAS ACTUALLY BECOM E BAD BEFORE A CLAIM FOR DEDUCTION AS BAD DEBT CAN BE MADE IN RESPECT OF THE SA ME. THE CIT(A) FURTHER HELD THAT SINCE ONLY AMOUNT OF BROKERAGE GETS INTO INCOME OF THE ASSESSEE, ENTIRE AMOUNT OF DUES CANNOT BE CLAIMED AS BAD DEBT. THE ACTION OF THE AO WAS THUS UPHELD ,AND IN FACT FORTIFIED, BY THE CIT(A). THE ASSESSEE IS AGGRIEVED AND IS IN NEXT APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT SO FAR AS THE QUESTION OF ESTABLISHING THE DEBT HAVING ACTUALLY BECOME BAD, BEFORE SAME CAN BE CLAIMED AS BAD DEBT, IS CONCERNED, THE SAME IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY HONBLE SUPREME C OURT S JUDGMENT IN THE CASE OF CIT VS. TRF LTD( (323 ITR 397 ). THE STAND TAKEN BY THE AUTHORITIES BELOW, ON THIS COUNT, CANNOT BE SUSTAINED IN LAW. SIMILARLY, AS R EGARDS THE QUESTION AS TO WHETHER THE ENTIRE DUES, OR ONLY THE PORTION REPRESEN TING BROKERAGE, CAN BE ALLOWED AS DEDUCTION, THE SAME IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY A SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. SHRE YAS MORAKHIA (131 TTJ 641 (BOM). THE DISALLOWANCE CANNOT BE SUSTAINED ON THIS CO UNT EITHER. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, W E HOLD THAT THE DISALLOWANCE OF RS.9,61,150 IN RESPECT OF BAD DEBTS WAS INDEED UNJUST IFIED. WE, ACCORDINGLY, DELETE THE SAME. 6. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2011 SD/- (D.MANMOHAN) VICE PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH SEPTEMBER, 2011 PARIDA I.T.A NO.560/ MUM/2009 ASSESSMENT YEAR: 2004-05 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),IV, MUMBAI 4. COMMISSIONER OF INCOME TAX,4 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH C MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI