M/S. AMISHREE STOCK BROKING P. LTD, MUMBAI V. THE DCIT CC-22,

ITA 703/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3911 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 05-10-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 31-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S SRIVASTAVA
• Keywords: Depreciation; Bad and doubtful debts; Revenue expenditure
• Section: 143(3); 153A; 243B; 234B

Judgement Text

1 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI N.V. VASUDEV AN, JM ITA NO. 702 & 703//MUM/08 ASSESSMENT YEARS 2000-01 & 2001-02 M/S AMISHREE STOCK BROKING O. LTD., 68/A, ALI CHAMBERS, 78-80, TAMARIND LANE, FORT, MUMBAI 400 001. PAN AACCA8995M VS. D.C.I.T. CC NO. 22, MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI VIJAY MEHTA RESPONDENT BY SHRI R.S. SRIVASTAVA ORDER PER P.M. JAGTAP, A.M. THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TW O SEPARATE ORDERS PASSED BY THE LD. CIT(A) IV, MUMBAI ON 24.12.07 FOR A.Y. 2000-01 & 2001-02 HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSIT E ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE AS SESSEE FOR A.Y. 2000-01 BEING ITA NO. 702/M/08. THE GROUNDS RAISED BY THE ASSESSEE IN TH IS APPEAL READ AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 WHICH IS INVALID AND BAD IN LAW. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN SUSTAINING THE ADDITION/DISALLOWANCE MADE BY THE ASSESSING OFFICER SINCE IT IS OUTSIDE THE PURVIEW OF S. 153A OF THE ACT. 2 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN CONFIRMING THE DISALLOWANCE OF THE BAD DEBTS WRITTEN OFF BY THE A PPELLANT IN THE P&L A/C AMOUNTING TO ` 6,96,231/-. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACT S IN UPHOLDING THE LEVY OF INTEREST U/S 243B AND 234C OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, THE LD. CO UNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1 & 2 RAISED BY THE ASSESSEE IN THIS APP EAL. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 4. AS REGARDS GROUND NO. 3, THE MATERIAL FACTS RELEVANT TO THE ISSUE RAISED THEREIN RELATING TO ASSESSEES CLAIM FOR DEDUCTION ON ACCOU NT OF BAD DEBTS WRITTEN OFF ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY WHICH IS CARRYIN G ON THE BUSINESS OF SHARE TRADING AS SUB-BROKER OF PRINCIPAL M/S SSKI SECURITIES PVT. LT D. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 29.11.2000 D ECLARING TOTAL INCOME OF ` 12,78,590/- . IN THE P&L FILED ALONG WITH THE SAID RETURN, A S UM OF ` 6,96,231/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED ON BEHALF OF THE ASSE SSEE COMPANY WHILE JUSTIFYING THE SAID CLAIM THAT ONE OF THE CLIENTS SHRI MAINAK SHAH DID NOT PAY THE OUTSTANDING AND THEREFORE THE BALANCE RECEIVABLE FROM HIM WAS WRITTEN OFF. I T WAS ALSO EXPLAINED THAT THE SAID DEBT HAD ARISEN ON ACCOUNT OF CLIENTS TRADE ON NSE THRO UGH THE BROKER SSKI INVESTOR SERVICES LTD. AND AS THE CLIENT DID NOT HONOUR ITS COMMITME NT OF OUTSTANDING TO M/S SSKI SECURITIES P. LTD., THE AMOUNT OUTSTANDING WAS RECO VERED FROM THE ASSESSEE BY SSKI. A COPY OF LEDGER ACCOUNT OF SHRI MAINAK SHAH IN ITS B OOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION WAS ALSO FURNISHED BY THE ASSESSEE TO SHOW THAT THE AMOUNT OF ` 6,96,231/- HAS BEEN WRITTEN OFF AS IRRECOVERABLE. AS PER THE SAID LEDGER ACCOUNT, THE AMOUNT OF ` 6,96,231/- WAS TRANSFERRED TO THE ACCOUNT OF THE AS SESSEE BY WAY OF JOURNAL ENTRY FROM THE BOOKS OF M/S SSKI SECURITIES. IT WAS EXPLAINED THA T AS ON 31.3.2000, THERE WAS A DEBIT BALANCE OF ` 14,07,765/- IN THIS NSE ACCOUNT PART OF WHICH WAS SUBSEQUENTLY RECOVERED BY SELLING THE SHARES OF THE CLIENT AVAILABLE WITH THE ASSESSEE FOR ` 7,19,744/- AND THE 3 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. BALANCE AMOUNT OF ` 696231/- WAS WRITTEN OFF AS IRRECOVERABLE. IT WAS STATED THAT THOUGH THE DEBT HAD BECOME BAD IN THE YEAR UNDER CONSIDERA TION, SALE OF SHARES COULD BE EFFECTED TO PARTLY RECOVER THE OUTSTANDING ONLY IN THE SUBSE QUENT YEAR TO AVOID TECHNICAL DEFAULT UNDER SEBI RULES. 6. THE SUBMISSIONS MADE ON BEHALF OF THE ASSESS EE IN SUPPORT OF ITS CLAIM FOR DEDUCTION OF ` 6,96,231/- ON ACCOUNT OF BAD DEBTS WERE NOT FOUND ACCEPTABLE BY THE A.O. AND HE PROCEEDED TO DISALLOW THE SAID DEDUCTION CLAIMED BY THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN THE ASSESSMENT ORDER: FROM THE ABOVE ACCOUNTING ENTRIES, IT IS EVIDENT TH AT THE NET DEBIT BALANCE IN NSE ACCOUNT AS ON 31.3.2000 WAS ` 14,07,765/- WHICH WAS APPEARING IN THE BOOKS OF SSKI SECURITIES PVT. LTD. AGAINST THIS LIABILITY , SHARES OF SHRI MAINAK SHAH WERE SOLD ON 23.6.2000 AND ONLY AFTER THIS TRANSACTION M /S SSKI SECURITIES PVT. LTD. HAS TRANSFERRED THE BALANCE IRRECOVERABLE AMOUNT OF ` 6,88,020/- TO M/S AMISHREE AS THE CLIENT WAS INTRODUCED BY AAMISHREE. M/S AMISHREE, IT APPEARS, HAS PRE-EMPTED THIS TRANSFER IN MARCH 2000 ITSELF AND THEREFORE, WRITTE N OFF AN AMOUNT OF ` 696231/- AS BUSINESS LOSS IN ITS BOOKS. CONSIDERING THE BUSINE SS TRANSACTION OF THE ASSESSE COMPANY, THERE IS NO DISPUTE THAT WRITE OFF OF NON -RECOVERABLE AMOUNT FROM A CLIENT WHICH WAS INTRODUCED BY THE ASSESSE IS BUSINESS LOS S IN ITS HANDS. THE QUESTION ARISES AS TO THE YEAR IN WHICH THIS BUSINESS LOSS H AD OCCURRED. THE CONTENTION OF THE ASSESSEE IS THAT IN ITS OPINION, THE LOSS HAD BEEN CRYSTALLIZED IN THE F.Y. 1990-00 AS IT HAD BECOME CLEAR THAT THIS PERSON IS NOT GOING TO H ONOUR ITS PAYMENT COMMITMENTS AND THE CHEQUES ISSUED BY THE CLIENT HAD BOUNCED. HOWEVER, THE ACCOUNTING ENTRIES IN THE BOOKS OF SSKI SECURITIES PVT. LTD., WHOSE AF FAIRS WERE BEING MANAGED BY THE ASSESSEE ITSELF, DOES NOT SUPPORT THIS CONTENTION. IN THE BOOKS OF SSKI, THE OUTSTANDING BALANCE HAS BEEN CARRIED ON TILL 30.6.2 000 AND ONLY AFTER THE SALE OF BALANCE SHARES BY AMISHREE AND PAYMENT OF ` . 7,19,744/- MADE TO SSKI ON 23.6.2000 ON 23.6.2000, THAT THE BALANCE AMOUNT OF ` 6,96,231/- HAS BEEN DEBITED TO AMISHREE ACCOUNT AS THEIR LIABILITY. THUS, THE LIAB ILITY OF M/S AMISHREE WITH REGARDS TO THIS AMOUNT OF ` 696231/- HAD ARISEN ON 30.6.2000, WHEN M/S SSKI CH ARGED AMISHREES ACCOUNT BY THIS AMOUNT. IN VIEW OF THE ABOVE FACTS, THE ONLY CONCLUSION THA T CAN BE DRAWN IS THAT THE LOSS ON ACCOUNT OF DEFAULTING CLIENT SHRI MAINAK SHAH HAD A RISEN ON 30.6.2000 WHEN M/S SSKI HAD DEBITED AMISHREES ACCOUNT DUE TO NON RECE IPT OF OUTSTANDING. IN ITS BOOKS OF ACCOUNTS FOR F.Y. 1990-00, THE ASSESSEE C OMPANY HAS UNILATERALLY CREDITED SSKI ACCOUNT AND WRITTEN OFF THE ABOVE ` . 696231/- AS BUSINESS LOSS WHICH IS NOT IN CONFORMITY WITH ACCOUNTS OF SSKI. THEREFORE, IT IS HELD THAT THE BUSINESS LOSS OF ` 696231/- ON ACCOUNT OF DEFAULT OF SHRI MAINAK SHAH HAS ARISEN IN THE A.Y. 2001-02 RELEVANT TO PREVIOUS YEAR 2000-01 AND THEREFORE, NO DEDUCTION FOR SUCH BUSINESS IS ALLOWABLE IN THE CURRENT YEAR. ACCORDINGLY, THE CL AIM OF ` 696231/- AS BUSINESS LOSS IS DISALLOWED IN THE CURRENT YEAR AND THE SAME SHAL L BE ALLOWED IN A.Y. 2001-02 I.E. THE YEAR IN WHICH SUCH LOSS HAS BEEN CRYSTALLIZED. 4 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. 7. THE MATTER WAS CARRIED BEFORE THE LD. CIT(A ) IN AN APPEAL FILED BY THE ASSESSEE AND THE SUBMISSIONS MADE BEFORE THE A.O. WERE REITERAT ED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A). THE LD. CIT(A), HOWEVER, DID NOT FI ND MERIT IN THE SAID SUBMISSIONS AND CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON ACCO UNT OF ASSESSEES CLAIM FOR BAD DEBTS WRITTEN OFF FOR THE FOLLOWING REASONS GIVEN I N PARA NO. 7 & 8 OF HIS IMPUGNED ORDER: I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE LD . COUNSEL AS WELL AS THE ASSESSMENT ORDER AND I AM NOT PERSUADED BY IT. I F IND NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER, IT IS AN INDISPUTABLE FACT THAT THE APPELLANT HAS CLAIMED BAD DEBT OF ` 698378/- IN THE P&L ACCOUNT COMPRISING OF SUNDRY B ALANCES WRITTEN OFF OF ` . 2147/- AND BUSINESS LOSS OF ` 696231/- ON ACCOUNT OF ONE OF ITS CLIENTS SHRI MAI RALE SHAH, WHO DID NOT PAY HIS OUTSTANDING DUES. THE AP PELLANT FURNISHED THE LEDGER ACCOUNT OF MAINALE SHAH IN ITS BOOKS OF ACCOUNT FOR FINANCIAL YEAR 1999-2000 WHEREIN AN AMOUNT OF ` 696231/- HAS BEEN SHOWN AS WRITTEN OFF. THE LEDGE R ACCOUNT SHOWS THAT THE ABOVE AMOUNT WAS TRANSFERRED TO THIS ACCOUNT BY WAY OF JOURNAL ENTRY FROM THE SSKI NSE ACCOUNT. THE BILLING WAS DONE BY M/S SSKI SECURITIES P. LTD. WHOSE AFFAIRS WERE BEING MANAGED BY THE APPELLANT C OMPANY. ON 31.03.2000 THERE WAS A DEBIT BALANCE OF 1407765/- IN THIS NSE ACCOUN T. THE APPELLANT HELD CERTAIN SHARES OF MAINALE SHAH WHICH WERE SUBSEQUENTLY SOLD FOR ` 719744/- AND THE DEBIT AMOUNT OF ` 696231/- WAS WRITTEN-OFF. IT WAS SUBMITTED THAT T HOUGH THE DEBT HAD BECOME BAD IN THE YEAR ENDING 31.03.2000, THE CLOSI NG ENTRIES AND SALE OF SHARES COULD NOT BE EFFECTED IN THAT YEAR TO AVOID TECHNIC AL DEFAULTS UNDER SEBI RULES AND APPROPRIATE ACTION WAS TAKEN IN JUNE 2000. IT IS EVIDENT THAT THE NET DEBIT BALANCE IN NSE ACC OUNT AS ON 31.3.2000 WAS ` 1407765/-WHICH WAS APPEARING IN THE BOOKS OF M/S SS KI SECURITIES PVT. LTD. AGAINST THIS LIABILITY THE SHARES OF MAINALE SHAH W ERE ACTUALLY SOLD ON 23.06.2000 AND ONLY AFTER THIS TRANSACTION, M/S SSKI SECURITIE S PVT. LTD. HAD TRANSFERRED THE BALANCE IRRECOVERABLE AMOUNT OF ` 688020/- TO M/S AMISHREE I.E THE APPELLANT AS THE SAID CLIENT WAS INTRODUCED BY THE APPELLANT. IT IS ALSO AN INDISPUTABLE FACT THAT THE APPELLANT HAD PROMPTED THIS TRANSFER IN MARCH 2000 ITSELF AND WRITTEN OFF THE AMOUNT AS BUSINESS LOSS IN ITS BOOKS. THE A.O. IS NOT DISP UTING THAT THE WRITE OFF OF THE NON- RECOVERABLE AMOUNT FROM A CLIENT WHO WAS INTRODUCED BY THE APPELLANT IS A BUSINESS LOSS IN ITS HANDS. THE ASSESSING OFFICER HOWEVER, IS OF THE VIEW THAT IN THE BOOKS OF SSKI THE OUTSTANDING BALANCE HAS BEEN CARRIED ON TI LL 30.06.2000 AND ONLY AFTER THE SALE OF SHARES BY M/S AMISHREE AND PAYMENT OF ` 719744/- MADE TO SSKI ON 23.06.2000 THAT THE BALANCE AMOUNT OF ` . 696231/- WAS DEBITED TO AMISHREE AS THEIR LIABILITY. THE LIABILITY OF THE APPELLANT WITH REG ARDS TO THIS AMOUNT OF ` 696231/- HAD ARISEN ON 30.062000 WHEN SSKI CHARGED THE APPELLANT S ACCOUNT BY THIS AMOUNT. IT WAS WRONG FOR THE APPELLANT TO UNILATERALLY CREDIT THE SSKI ACCOUNT AND WRITER OFF THE SAID AMOUNT ON 30.03.2000. IT IS CLEAR THAT THE BU SINESS LOSS OF ` 696231/- ON ACCOUNT OF SHRI MAINAK SHAH HAD ARISEN ONLY IN A.Y. 2001-02 AND SHOULD BE ALLOWED IN THAT YEAR. IN FIND NO REASON TO INTERFERE IN TH E ORDER OF ASSESSING OFFICER AND HENCE, THE GROUND OF APPEAL FAILS. 5 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RELEVANT DEBT HAD ACTUALLY BECOME BAD IN THE YEAR UNDER CONSIDERATION ITSELF A ND ACCORDINGLY THE DECISION TO WRITE OFF THE SAME FROM THE BOOKS OF ACCOUNT AS IRRECOVER ABLE WAS TAKEN BY THE ASSESSEE. HE SUBMITTED THAT EVEN THOUGH THE SHARES OF THE CONCER NED DEBTOR/CLIENT AVAILABLE WITH THE ASSESSEE WERE SOLD SUBSEQUENTLY TO RECOVER THE OUTS TANDING AMOUNT PARTLY AND THE EXACT AMOUNT OF BAD DEBTS WAS QUANTIFIED ONLY ON SUCH SAL E, THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY WERE OPEN AT THAT TIME AND ACCORDI NGLY ENTRIES WERE MADE TO WRITE OFF THE EXACT BALANCE AMOUNT OF DEBT FROM THE BOOKS OF ACCOUNT AS IRRECOVERABLE. HE CONTENDED THAT THE CONDITION FOR CLAIMING THE DEDUC TION ON ACCOUNT OF BAD DEBT THUS WAS DULY SATISFIED BY THE ASSESSEE IN THE YEAR UNDER CO NSIDERATION AND THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE FOR THE SAID DEDUCTION. 9. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT FOR CLAIMING DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF, THE CONCERNED DEBT HAS TO BE COME BAD IN THE RELEVANT YEAR. HE CONTENDED THAT THE BAD DEBT IN QUESTION INVOLVED IN THE PRESENT CASE HAD ACTUALLY CRYSTALLIZED ONLY ON 30.6.2000 I.E. IN THE IMMEDIAT ELY SUCCEEDING YEAR WHEN THE SHARES OF THE CLIENT AVAILABLE AS SECURITY WITH THE ASSESSEE WERE SOLD AND BALANCE OUTSTANDING AMOUNT WAS TREATED AS BAD DEBT. HE CONTENDED THAT THE ASSESSEE COMPANY THUS HAD CLEARLY PRE-EMPTED THE SITUATION AS RIGHTLY HELD BY THE AUTHORITIES BELOW AND SINCE THE ACCOUNTING ENTRY ITSELF WRITING OFF THE RELEVANT DE BT AS IRRECOVERABLE IN THE BOOKS OF ACCOUNT WAS PATENTLY WRONG, THE DEDUCTION CLAIMED B Y THE ASSESSEE CANNOT BE ALLOWED ON THE BASIS OF SUCH WRONG ENTRY. HE CONTENDED THAT T HE ASSESSEE CAN CLAIM THE SAID DEDUCTION ONLY IN THAT SUBSEQUENT YEAR AND NOT IN T HAT YEAR UNDER CONSIDERATION. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AMOUNT RECEIVAB LE FROM SHRI MAINAK SHAH WAS OUTSTANDING IN THE YEAR UNDER CONSIDERATION AND ALT HOUGH THE SAID DEBT SHOWN IN THE BOOKS OF M/S SSKI WAS TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE BY M/S SSKI ONLY IN THE NEXT YEAR IN THE MONTH OF JUNE, 2000, THE FACT REMAINS THAT THE SAID DEBT ACTUALLY 6 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. REPRESENTED THE TRADING DEBT OF THE ASSESSEE WHICH WAS OUTSTANDING/RECEIVABLE IN THE YEAR UNDER CONSIDERATION. AS A MATTER OF FACT, ENTRY WA S DULY PASSED BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDER ATION SHOWING THE SAID DEBT AS ITS OWN DEBT. EVEN THE ENTRY TO WRITE OFF THE SAID DEBT AS IRRECOVERABLE WAS PASSED BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION WHICH SHOWS THAT THE DECISION TO TREAT THE SAID DEBT AS BAD DEBT WAS TAK EN BY THE ASSESSEE COMPANY IN THAT YEAR ITSELF. IT IS NO DOUBT TRUE THAT THE SHARES OF THE CONCERNED DEBTOR AVAILABLE WITH THE ASSESSEE COMPANY AS SECURITY WERE SOLD SUBSEQUENTLY IN THE MONTH OF JUNE, 2000 AND BALANCE OUTSTANDING AMOUNT WAS QUANTIFIED AS BAD DE BT ONLY ON SUCH SALE, THE ENTRY TO WRITE OFF THE DEBT SO QUANTIFIED AS IRRECOVERABLE W AS PASSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. ADMITTEDL Y THERE IS NO SUCH ENTRY WHICH HAS BEEN PASSED BY THE ASSESSEE COMPANY FOR WRITING OFF THE SAID DEBT AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNT FOR THE IMMEDIATELY SUCCEEDING YEA R I.E. A.Y. 2001-02. IN THE CASE OF TRF LTD. 323 ITR 397 (SC), THE HONBLE SUPREME COUR T HAS HELD THAT EVERY ASSESSEE PRIOR TO 1.4.89 HAD TO ESTABLISH, AS A MATTER OF FA CT, THAT THE DEBT ADVANCED BY HIM HAD IN FACT BECOME IRRECOVERABLE. AS FURTHER HELD BY THE HONBLE SUPREME COURT, THIS POSITION, HOWEVER, GOT ALTERED BY THE DELETION OF THE WORD E STABLISHED WHICH EARLIER EXISTED IN SECTION 36(1)(VII). THE HONBLE SUPREME COURT HAS H ELD THAT IT IS THEREFORE NOT NECESSARY FOR THE ASSESSEE W.E.F. 1.4.89 TO ESTABLISH THAT TH E DEBT IN FACT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA), WE HOLD THAT THE ASSESSEE HAVI NG ADMITTEDLY WRITTEN OFF THE BAD DEBTS IN QUESTION AS IRRECOVERABLE IN THE BOOKS OF ACCOUN T FOR THE YEAR UNDER CONSIDERATION, IT IS ENTITLED FOR DEDUCTION U/S 36(1)(VII). WE, THEREFO RE, DELETE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ASSES SEES CLAIM FOR BAD DEBTS WRITTEN OFF AND ALLOW GROUND NO. 3 OF ASSESSEES APPEAL. 7 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. 11. THE ISSUE RAISED THE ASSESSEE IN GROUND NO. 4 RELATING TO LEVY OF INTEREST U/S 234B & 234C ARE CONSEQUENTIAL IN NATURE. THE A.O. IS AC CORDINGLY DIRECTED TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESSEE ON THESE ISSUE S. . 12. NOW, WE SHALL TAKE UP THE APPEAL OF THE AS SESSEE FOR A.Y. 2001-02 BEING ITA NO. 703/M/08. 13. GROUND NO. 1 & 2 RAISED BY THE ASSESSEE I N THIS APPEAL ARE SIMILAR TO THAT OF GROUND NO. 1 & 2 OF ASSESSEES APPEAL FOR A.Y. 2000 -01. THE SAME, HOWEVER, ARE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 14. GROUND NO. 3 DISPUTES THE ADDITION OF ` 58,396/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF UNCLAIMED DIVIDEND . 15. THE AMOUNT OF ` 58,396/- APPEARING ON THE LIABILITY SIDE OF THE BA LANCE SHEET ON ACCOUNT OF UNCLAIMED DIVIDEND WAS ADDED BY THE AUTH ORITIES BELOW TO THE TOTAL INCOME OF THE ASSESSEE MAINLY AS A RESULT OF THE FAILURE OF T HE ASSESSEE TO PROVE THAT THE SAID DIVIDEND WAS RECEIVED ON BEHALF OF ITS CLIENTS ON T HE BASIS OF SHARE TRADING TRANSACTIONS CONDUCTED BY IT ON BEHALF OF THE SAID CLIENTS AS CL AIMED AND ALSO FOR THE FAILURE OF THE ASSESSE TO GIVE NAMES AND ADDRESS OF THE PERSONS TO WHOM THE UNCLAIMED DIVIDEND ACTUALLY BELONGED. AT THE TIME OF HEARING BEFORE U S, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS AMOUNT OF UNCLAIMED DIVIDEND HA S BEEN OFFERED BY THE ASSESSEE COMPANY AS ITS INCOME IN A.Y. 2008-09 AFTER PASSING THE NECESSARY ENTRY IN ITS BOOKS OF ACCOUNT. THE LIMITED RELIEF SOUGHT BY HIM ON THIS ISSUE IS THAT THIS AMOUNT MAY BE TAXED IN THE HANDS OF THE ASSESSEE ONLY ONCE AND SUITABLE DIRECTION MAY ACCORDINGLY BE GIVEN TO THE A.O. SINCE THE LD. COUNSEL FOR THE ASSESSEE HA S NOT RAISED ANY CONTENTION TO DISPUTE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF UNCLAIMED 8 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. DIVIDEND IN THE YEAR UNDER CONSIDERATION, WE FIND N O JUSTIFIABLE REASON TO INTERFERE WITH THE SAME. ACCORDINGLY, THE SAID ADDITION MADE IN T HE YEAR UNDER CONSIDERATION IS CONFIRMED WITH A DIRECTION TO THE A.O. TO ALLOW PRO PER RELIEF TO THE ASSESSEE IN A.Y. 2008- 09 WHERE THIS AMOUNT IS CLAIMED TO HAVE BEEN OFFERE D BY THE ASSESSEE COMPANY AS ITS INCOME AFTER NECESSARY VERIFICATION. GROUND NO. 3 OF THE ASSESSEES APPEAL IS ACCORDINGLY DISMISSED. 16. IN GROUND NO. 4, THE ASSESSEE HAS CHALLENG ED THE ADDITION OF ` 3,50,000/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) BY WAY OF DISALLOWANCE OF WEB DESIGNING EXPENDITURE TREATING THE SAME AS CAPITAL IN NATURE. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE DISALLOWANCE MADE B Y THE A.O. ON ACCOUNT OF WEBSITE DEVELOPMENT EXPENSES TREATING THE SAME AS CAPITAL I N NATURE WAS CONFIRMED BY THE LD. CIT(A) ON THE GROUND THAT SUCH EXPENDITURE ALLOWED ENDURING BENEFIT TO THE ASSESSEE COMPANY. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS CITED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN VISIT. COM 219 CTR (DEL) 603 WHEREIN IT WAS HELD THAT ALTHOUGH THE WEB SITE MAY PROVIDE AN ENDURING BENEFIT TO THE ASSESSEE, THE INTENT AND PURPOSE BEHIND DEVE LOPMENT OF A WEBSITE IS NOT TO CREATE AN ASSET BUT ONLY TO PROVIDE A MEANS FOR DISSEMINATING INFORMATION ABOUT THE ASSESSEE AMONG ITS CLIENTS.. IT WAS HELD THAT MERE ENDURING BENEFIT DE HORS ANY ACCRETION TO FIXED CAPITAL WOULD NOT MAKE EXPENDITURE A CAPITAL EXPEND ITURE. IT WAS HELD THAT THE EXPENDITURE ON DEVELOPMENT OF WEBSITE WITH A VIEW T O DISSEMINATE INFORMATION ABOUT THE ASSESSEES BUSINESS ACTIVITIES AMONGST ITS CLIENTS IS REVENUE EXPENDITURE EVEN THOUGH RESULTING IN ENDURING BENEFIT. IN OUR OPINION, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN VISIT.COM (SUPRA) IS SQUARELY APPLICABLE TO THE ISSUE INVOLVED IN GROUND NO. 4 OF ASSESSES APPEAL AND RESPECTFULLY F OLLOWING THE SAME, WE DIRECT THE A.O. TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE ON A CCOUNT OF WEBSITE DESIGNING 9 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. EXPENDITURE BEING REVENUE IN NATURE. GROUND NO. 4 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 18. GROUND NO. 5 RELATING TO THE ASSESSEES AL TERNATIVE CLAIM FOR DEPRECIATION AT A HIGHER RATE ON THE WEB DESIGNING EXPENDITURE IF TRE ATED AS CAPITAL IN NATURE IS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE. THE SAME IS A CCORDINGLY DISMISSED AS NOT PRESSED. 19. IN GROUND NO. 6, THE ASSESSEE HAS CHALLENGE D THE DISALLOWANCE OF ` 18,65,293/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 20. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SI DES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS DISALLOWED BY THE A.O. AND THE SAID DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) MAINLY ON TWO GROUNDS. FIRSTLY, ACCORDING TO THE AUTHORITIES BELOW, THE ASSESSEE WAS REQUIRED TO ESTABLISH IN OR DER TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS U/S 36(1)(VII) THAT SUCH DEBTS WRITTEN OF F IN THE BOOKS OF ACCOUNT HAD ACTUALLY BECOME BAD DURING THE RELEVANT YEAR AND THIS REQUIR EMENT WAS NOT SATISFIED BY THE ASSESSEE IN THE PRESENT CASE. SECONDLY, THEY HELD THAT THE ASSESSEE HAVING CREDITED ONLY THE BROKERAGE INCOME TO THE P&L ACCOUNT AND NOT THE VALUE OF PURCHASE OF SHARES, THE DEBTS REPRESENTING AMOUNT RECEIVABLE FROM CLIENTS A GAINST PURCHASE OF SHARES HAD NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE AND THE CONDITIONS STIPULATED IN SECTION 36(2) THUS WAS NOT SATISFIED. 21. AS REGARDS THE FIRST REASON GIVEN BY THE A UTHORITIES BELOW FOR DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEB TS U/S 36(1)(VII), IT IS OBSERVED THAT THIS ISSUE NOW STANDS SQUARELY COVERED BY THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA)WHEREIN IT HAS BEEN HELD TH AT EVERY ASSESSEE PRIOR TO 1.4.89 HAD TO ESTABLISH, AS A MATTER OF FACT, THAT THE DEBT AD VANCED BY HIM HAD IN FACT BECOME 10 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. IRRECOVERABLE. AS FURTHER HELD BY THE HONBLE SUPR EME COURT, THIS POSITION, HOWEVER, GOT ALTERED BY THE DELETION OF THE WORD ESTABLISHED W HICH EARLIER EXISTED IN SECTION 36(1)(VII). THE HONBLE SUPREME COURT HAS HELD THAT IT IS THEREFORE NOT NECESSARY FOR THE ASSESSEE W.E.F. 1.4.89 TO ESTABLISH THAT THE DEBT I N FACT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. AS REGARDS THE SECOND REASON GIVEN BY THE AUTHORITIES BELOW FOR DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 36(1)(VII), THIS ISSUE A LSO NOW STANDS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF SH REYAS S. MORAKHIA [ITA NO. 3374/MUM/04 DATED 16.07.2010] WHEREIN IT WAS HELD T HAT AMOUNT RECEIVABLE BY THE ASSESSEE, WHO IS A SHARE BROKER, FROM HIS CLIENTS A GAINST THE TRANSACTIONS OF PURCHASE OF SHARES ON THEIR BEHALF CONSTITUTES DEBT WHICH IS A TRADING DEBT. IT WAS HELD THAT THE BROKERAGE/COMMISSION INCOME ARISING FROM SUCH TRANS ACTIONS 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 RELEVANT PREVIOUS YEAR OR ANY EARLIER YEAR, IT SATISFIES THE CONDITION 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 BOOKS OF ACCOUNT AS IRRECOVERABLE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPR A) AS WELL AS THAT OF SPECIAL BENCH OF ITAT IN THE CASE OF SHREYAS S. MORAKHIA (SUPRA), WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF. GROU ND NO. 6 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 22. THE ISSUE RAISED IN GROUND NO. 7 RELATING TO LEVY OF INTEREST U/S 234B & 234C ARE CONSEQUENTIAL IN NATURE. THE A.O. IS ACCORDINGLY D IRECTED TO GIVE CONSEQUENTIAL RELIEF TO THE ASSESSEE ON THIS ISSUE. 11 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. 23. IN THE RESULT, BOTH THE APPEALS OF THE ASSE SSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 4 TH NOVEMBER, 2010. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED 4 TH NOVEMBER , 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV - MUMBAI 4. THE CIT- CENTRAL II, MUMBAI 5. THE DR BENCH, H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 12 ITA 702 & 703/M/08, AMISHREE STOCK BROKING P. LTD. DATE INITIALS 1. DRAFT DICTATED 19.10.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 26.10.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.