ACIT 8(1), MUMBAI V. ANGEL COMMODITIES BROKING P. LTD, MUMBAI

ITA 5754/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8943 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 29-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR B SENTHIL KUMAR
• Keywords: Non-deduction of tax; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.5754/MUM/2009 A.Y 2006-07 ASST, COMMISSIONER OF I.T. 8(1), MUMBAI. VS. ANGEL COMMODITIES BROKING PVT. LTD., G 1 AKRUTI TRADE CENTRE, ROAD NO.7, MIDC, ANDHERI (E), MUMBAI 400 093 PAN: AAACK 3472 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ADITYA MAHESHWARI. RESPONDENT BY : DR. B. SENTHIL KUMAR. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT[A] ERRED IN DELETING THE ADDITION OF ` `` ` .2,50,738/- U/S.40[A][IA], WITHOUT APPRECIATING THE FACTS OF TH E CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT[A] ERRED IN DELETING THE DISALLOWANCE OF BU SINESS LOSS OF ` `` ` .27,86,694/- WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT AO DISALLOWED VSAT LEASE LINE CHARGES BECAUSE TAX WAS NOT DEDUCTED U/S.40[A][IA]. 3. ON APPEAL, LD. CIT[A] DELETED THE ADDITION BY HO LDING THAT THESE LEASE LINE CHARGES CANNOT BE CONSIDERED TO BE TECHN ICAL SERVICES. 4. BEFORE US, LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER . 2 5. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE S UBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. ANGEL BROKING LTD. [35 SOT 47]. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. ANGEL BROKING LTD. [SUPRA] WHEREIN IT WAS HELD THAT PROVISIONS OF VSAT LEASE LINE CHARGES COULD NOT BE CONSIDERED AS RENDERING OF TECHNICAL SERVICES AND, THEREFORE, ASSESSEE WAS NOT REQUIRED TO DEDUCT ANY TAX AND ACCORDINGLY THE DISALLOWANCE COULD NOT BE MADE U/S.40[A][IA] FOR FAILURE TO DEDUCT TAX. FOLLOWING THIS DECISION OF THE TRIBUNAL, WE DECIDE THE ISSUE AGAINST THE ASSESSEE. 7. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES, WE FIND THAT ASSESSEE HAS CLAIMED BUSINESS LOSS ON ACCOUNT OF NO N RECOVERY OF CERTAIN DUES FROM THE CUSTOMERS WHICH HAVE BEEN DIS ALLOWED BY THE AO MAINLY BECAUSE PROVISIONS OF SEC.36(2) ARE NOT C OMPLIED WITH. 8. ON APPEAL, LD. CIT[A] DELETED BY ADDITION BY FOL LOWING THE DECISION OF DCIT VS. OMAN INTERNATIONAL BANK SAOG [ 102 TTJ 207]. 9. BEFORE US, LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER. 10. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF DY. CIT VS. SHRI SHREYAS S.MORAKHIA [210 ITR 1]. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IN THE CASE OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. SHRI SHREYAS S.MORAKHIA VIDE PARA-32 IT WAS HELD AS UNDER [210 ITR 1]: 3 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 RECEIVABLE BY THE A SSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIENTS AGAINST THE TRANSACTIONS O F PURCHASE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. TH E BROKERAGE/COMMISSION INCOME ARISING FROM SUCH TRANSACTIONS VERY MUCH FOR MS PART OF THE SAID DEBT AND WHEN THE AMOUNT OF SUCH BROKERAGE/COMMISSION HA S BEEN TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITIO N STIPULATED 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 BOO KS OF ACCOUNT AS IRRECOVERABLE. WE, THEREFORE, ANSWER THE QUESTION R EFERRED TO THIS SPECIAL BENCH IN THE AFFIRMATIVE THAT IS IN FAVOUR OF THE A SSESSEE. WE FURTHER FIND THAT IN THE CASE BEFORE US THOUGH A SSESSEE IS A BROKER OF COMMODITY EXCHANGE BUT THE PRINCIPLES LAID DOWN IN THE CASE OF SHRI SHREYAS S. MORAKHIA [SUPRA] ARE EQUALLY APPLICABLE. THEREFORE, FOLLOWING THAT DECISION WE SET ASIDE THE ORDER OF T HE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND AFTER SUCH VERIFICATION A LLOW THE BAD DEBTS IN LINE WITH THE DECISION OF THE SPECIAL BENCH IN THE CASE OF SHRI SHREYAS S. MORAKHIA [SUPRA]. 12. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. 20. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12TH DAY OF JANUARY, 2011. (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 12 TH JANUARY, 2011. P/-*