Appeal details
Counselvise Citation
614619914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-12-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
F
Assessment Year
misc
Appeal Filed On
11-08-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE SHIRI R. S. PADVEKAR, J.M. AND SHRI RAJENDRA SINGH, A.M. ITA NO. : 6146/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. V . D. MANIAR SHARES & STOCK BROKERS PVT. LTD. 731, ROTUNDA BLDG., B.S. MARG, MUMBAI-400 023 PAN NO: AACCV 0886 E VS. THE INCOME TAX OFFICER, WARD 4(2)(2), AAYKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HITEN VASANT RESPONDENT BY : SHRI S UBACHAN RAM DATE OF HEARING : 12 .1 2 .2011 DATE OF PRONOUNCEMENT : 23.12.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.11.2009 OF THE LD. CIT(A)-8, MUMBAI FOR THE ASSE SSMENT YEAR 2006- 07. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGAR DING THE ALLOWABILITY OF BAD DEBTS CLAIMED BY THE ASSESSEE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS IN THE SHARE BROKERING BUSINESS HAD CLAIMED DEDUCTION OF `. 25,29,312/- ON ACCOUNT OF BAD DEBTS. WHEN ASKED TO EXPLAIN THE CLA IM, THE ASSESSEE SUBMITTED THAT THE ASSESSEE EARLIER WAS DOING THE B USINESS AS ITA NO : 6146/MUM/2010 M/S. V . D. MANIAR SHARE & STOCK BROKERS PVT. LTD. 2 PARTNERSHIP FIRM IN THE NAME OF M/S. V. D. MANIAR, IN WHICH SHRI R. V. MANIAR AND SHRI K. R. MANIAR WERE PARTNERS. THE FIR M WAS CONVERTED INTO THE PRIVATE LIMITED COMPANY WHICH IS ASSESSEE UNDER REFERENCE AND THE SAME PERSONS WHO WERE PARTNERS IN THE PARTN ERSHIP FIRM BECAME SHAREHOLDERS AND DIRECTORS IN THE ASSESSEE C OMPANY. ALL THE ASSETS AND LIABILITIES OF THE FIRM WERE TAKEN OVER BY THE ASSESSEE COMPANY. THE DETAILS OF BAD DEBTS CLAIMED WAS IN RE LATION TO THE SHARES PURCHASED BY THE ERSTWHILE FIRM ON BEHALF OF CERTAIN CLIENTS, WHO DID NOT PAY THE CONSIDERATION. THE DETAILS WERE GIVEN AS UNDER :- 1. VIRENDRA PANC HMATIA `. 3,48,817.10 2. PRAKASH S. DHANAK `. 11,70,494.90 3. SUYASH PORTFOLIO SERVICES `. 10,10,000.00 2.1 THE AO OBSERVED THAT THE CLAIM OF BAD DEBTS WAS ON ACCOUNT OF SHARES PURCHASED ON BEHALF OF THE CLIENTS. SUCH DEB TS WERE NEVER OFFERED AS INCOME IN THE HANDS OF ERSTWHILE FIRM OR IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, THE CONDITIONS OF SECT ION 36(2) WERE NOT FULFILLED. THE AO ALSO OBSERVED THAT SIMILAR CLAIM HAD BEEN DISALLOWED IN THE ASSESSMENT YEAR 2006-07. THE AO, THEREFORE, DISALLOWED THE CLAIM. IN APPEAL, CIT(A) OBSERVED THAT THE ASSESSEE HAD EARNED ONLY THE BROKERAGE INCOME IN RESPECT OF THE SHARES PURCH ASED AND, THEREFORE, HE HELD THAT THE CLAIM OF BAD DEBTS COUL D BE ALLOWED ONLY UPTO THE BROKERAGE IN RELATION TO THE SAID TRANSACT IONS. AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE HAS SUBMI TTED THAT THE ISSUE RAISED IN THIS APPEAL WAS COVERED BY THE DECI SION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SHRI SHREYAS S. MORAKHIA (5 ITR (TRIB) 1), IN WHICH IT HAS BEEN HEL D THAT THE BROKER ITA NO : 6146/MUM/2010 M/S. V . D. MANIAR SHARE & STOCK BROKERS PVT. LTD. 3 COULD CLAIM THE BAD DEBTS ON ACCOUNT OF MONEY WHICH CAN NOT BE RECOVERED FROM CLIENTS. THE LD. DR, ON THE OTHER HA ND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING THE ALLOWABILITY OF CLAIM OF BAD DEBTS ON ACCOUNT OF PURCHASE OF SHARES MADE BY THE ASSESSEE ON BEHALF OF CLIENTS, WHICH COULD NOT BE RECOVERED. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT THE DEBT HAD NOT BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF THE INCOME OF THE ASSESSEE IN THE EARLIER YEAR. CIT(A) HELD THAT THE BAD DEBT COULD BE ALLOWED ONLY TO THE EXTENT OF BROKERAGE INCOME AND NOT THE PURCHASE CONSIDERATION PAID BY THE ASSESSEE AND NOT RECOVERED FROM THE CLIENTS. IN OUR VIEW, ISSUE IS COVERED BY THE DECISION OF SPECIAL BENCH OF TRIBUNA L IN CASE OF SHRI SHREYAS S. MORAKHIA (SUPRA), IN WHICH IT HAS BEEN H ELD THAT BROKERAGE/COMMISSION ARISING FROM SUCH SHARE TRANSA CTIONS FORMS PART OF DEBT AND, THEREFORE, IN CASE BROKERAGE/COMM ISSION HAS BEEN TAKEN INTO ACCOUNT IN THE COMPUTATION OF INCOME OF EARLIER YEAR, THE CLAIM OF BAD DEBT HAS TO BE ALLOWED. IN THIS CASE, WHETHER THE BROKERAGE/COMMISSION INCOME HAD BEEN TAKEN INTO ACC OUNT IN THE COMPUTATION OF INCOME OF THE EARLIER YEAR IN RELATI ON TO THE SAID TRANSACTIONS IS REQUIRED TO BE VERIFIED. IT IS ALSO REQUIRED TO BE SEEN AS TO HOW THE SHARES PURCHASED BY THE ASSESSEE ON BEHA LF OF THE CLIENT HAD BEEN DEALT WITH AND WHETHER ANY MONEY WAS RECOV ERED BY THE ASSESSEE FROM SALE OF THE SHARES AND IN THAT CASE, WHETHER THE SAME WAS ADJUSTED AGAINST THE MONEY DUE FROM THE CLIENTS . WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE M ATTER TO THE FILE OF THE AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMIN ATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUN ITY OF HEARING TO THE ASSESSEE. ITA NO : 6146/MUM/2010 M/S. V . D. MANIAR SHARE & STOCK BROKERS PVT. LTD. 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 23 RD DAY OF DECEMBER, 2011. S D/ - S D/ - ( R. S. PADVEKAR ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 23.12.2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, F - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI
