MALIRAM MAKHARIA FINSTOCK P. LTD, MUMBAI V. ITO WD 4(3)(3), MUMBAI

ITA 578/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6302 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S RAWAL; P N DEVADASAN
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A.NO.578/MUM/2010 - A.Y 2006-07 MALIRAM MAKHARIA FINSTOCK PVT. LTD., 906, RAHEJA CENTRE, NARIMAN POINT, MUMBAI 400 001. PAN: AACCM 1102 E VS. THE INCOME TAX OFFICER, WARD 4(3)(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. K. SHIVRAM. RESPONDENT BY : S/SHRI R.S.RAWAL & P.N.DEVADASAN. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL, ASSESSEE HAS RAISED TWO GROUNDS OU T OF WHICH GROUND NO.2 WAS NOT PRESSED BEFORE US AND, THEREFOR E, SAME IS DISMISSED AS NOT PRESSED. GROUND NO.1 IS AS UNDER: 1. THE LD. CIT[A] ERRED IN CONFIRMING THE DISALLOW ANCE OF BAD DEBTS OF ` `` ` .8,21,550/-. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE AO DISALLOWED THE BAD DEBTS BECAUSE ASSESSEE HAD NOT COMPLIED WIT H THE CONDITIONS LAID DOWN IN SEC.36(2). THE ADDITION WAS UPHELD BY THE LD. CIT[A]. NOW THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE WHO IS A STOCK BROKER, BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. SHRI SHREYAS S.MORAKHIA, I.T.A.NO.33 74/MUM2004 DATED 16 TH JULY, 2010 WHEREIN IT HAS BEEN 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 2 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 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 DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 3. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24TH DAY OF NOVEMBER, 2010. SD/- SD/- (VIJAY PAL RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI:24 TH NOVEMBER, 2010. P/-*