M/s. KOTAK SECURITIES LTD., MUMBAI v. ADDL. CIT. Rg. - 4(3), MUMBAI

ITA 1501/MUM/2007 | 2003-2004
Pronouncement Date: 27-07-2011 | Result: Allowed

Appeal Details

RSA Number 150119914 RSA 2007
Assessee PAN AAACK3436F
Bench Mumbai
Appeal Number ITA 1501/MUM/2007
Duration Of Justice 4 year(s) 5 month(s) 12 day(s)
Appellant M/s. KOTAK SECURITIES LTD., MUMBAI
Respondent ADDL. CIT. Rg. - 4(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 27-07-2011
Date Of Final Hearing 28-12-2009
Next Hearing Date 28-12-2009
Assessment Year 2003-2004
Appeal Filed On 15-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI J. SUDHAKAR REDDY A.M. AND SHRI V. DUR GA RAO J.M. ITA NOS. 3272/MUM/06 1501 & 1052/MUM/2007 ASSESSMENT YEARS: 2002-03 2003-04 & 2004-05 KOTAK SECURITIES LTD. APPELLANT 1 ST FLOOR BAKTHAWAR 229 NARIMAN POINT MUMBAI 400 021. (PAN AAACK3436F) VS. ADDL. COMMISSIONER OF INCOME-TAX RESPONDENT RANGE 4(3) AAYAKAR BHAVAN MUMBAI 400 020. APPELLANT BY : MR. F.V. IRANI RESPONDENT BY : MR. BALAKRISHNA . ORDER PER V. DURGA RAO J.M.: THESE THREE APPEALS PERTAIN TO ONE ASSESSEE AND TH E SAME ARE DIRECTED AGAINST THE ORDERS OF CIT(A) FOR THE ASSES SMENT YEARS 2002-03 TO 2004-05. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS THEY WERE HEARD TOGETHER AND THEREFORE A COMMON ORDER IS PASSED FOR THE SAKE CONVENIENCE. ITA NO. 3272/M/08 FOR AY 2002-03 2. GROUND NO. 1 IS RELATING TO REOPENING OF ASSESSM ENT. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT HE HAS A GOOD CASE TO ARGUE ON REOPENING OF ASSESSMENT WHEREAS THE LEARNED DR HAS SUBMITTED THAT REOPENING WAS MADE WI THIN FOUR YEARS. BOTH THE PARTIES SUBMITTED THAT MOST OF THE ISSUES INVOLVED IN THIS ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 2 APPEAL ARE ON MERIT COVERED BY EITHER ASSESSEES OWN CASE OR BY THE DECISIONS OF THE ITAT THEREFORE THIS GROUND WITH REGARDING TO REOPENING IS NOT REQUIRED TO BE ADJUDICATED BY US A S IT IS MERELY ACADEMIC IN NATURE. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS NOT ADJUDICATED. 3. GROUND NO. 2 PERTAINS TO DISALLOWANCE OF DEPRECI ATION OF STOCK EXCHANGE MEMBERSHIP CARD. 4. BRIEFLY THE FACTS RELATING TO RAISE THIS GROUND ARE THAT THE ASSESSEE HAD STATED THAT DURING THE FY 1995-96 THE ASSESSEE HAD PURCHASED FIRST BSE MEMBERSHIP CARD FOR A SUM OF RS . 2.00 CRORES AND HAD INCURRED RS. 13 25 000/- AS INCIDENTAL & TR ANSFER EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE HAD MADE A CLAIM FOR DEPRECIATION ON FIRST STOCK EXCHANGE CA RD AMOUNTING TO RS. 53 31 250/- ON THE GROUND THAT BSE MEMBERSHIP CARD IS A PLANT AND AN APPARATUS TO CARRY ON STOCK BROKING BUSINESS AND IT IS A TOOL OF TRADE. THE AO REJECTED THE SUBMISSIONS OF THE ASSES SEE AND DISALLOWED THE CLAIM OF DEPRECIATION. THE CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE IS NOT ENTITLED FOR DE PRECIATION ON FIRST BSE MEMBERSHIP CARD PURCHASED DURING THE FINANCIAL YEAR 1995-06. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS I N APPEAL BEFORE THE ITAT. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE H AS CANVASSED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY TH E DECISION OF ITAT IN ASSESSEES OWN CASE IN AY 2005-06 IN ITA NO. 195 5/MUM/08 VIDE ORDER DATED 26 TH AUGUST 2008 (25 SOT 440 (MUM) A COPY OF WHICH HAS BEEN FILED ON RECORD. THE LEARNED DR ON THE OT HER HAND DID NOT CONTROVERT THE SUBMISSIONS OF THE ASSESSEE. 6. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSING THE RECORD WE FIND THAT IN AY 2005-06 IN ASSESSEES OWN ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 3 CASE (SUPRA) THE ITAT ALLOWED THE DEPRECIATION OF STOCK EXCHANGE MEMBERSHIP CARD BY OBSERVING AS UNDER:- 11. ITAT MUMBAI BENCHES HAVING CONSISTENTLY BEEN TA KING A VIEW THAT DEPRECIATION ON MEMBERSHIP CARD OF STOCK EXCHANGE IS TO BE ALLOWED. FOLLOWING ARE SOME OF THE CASES IN T HIS REGARD:- 1. TATA WAREHOUSE SECURITIES VS. DCIT ITA NO. 6600 /MUM/04 2. PANENCULAR CAPITAL MARKET LTD. VS. ACIT 19 SOT 42 3. M/S KANDWALLA FINANCE LTD. ITA NO. 6986/MUM/02 4. MANJESH J. PATEL ITA NO. 3710/MUM/97 12. IN THE LIGHT OF THE AFORESAID DECISION WE ARE OF THE VIEW THAT STAND TAKEN ON BEHALF OF THE REVENUE IS WITHOU T MERIT. WE THEREFORE HOLD BY FOLLOWING EARLIER DECISIONS OF THE TRIBUNAL THAT THE ASSESSEE WOULD BE ENTITLED TO CLAIM DEPREC IATION ON WDV OF THE MEMBERSHIP RIGHT OF THE STOCK EXCHANGE MUMBA I. 7. SINCE THE ISSUE RAISED IN YEARS UNDER CONSIDERAT ION IS IDENTICAL TO THAT OF AY 2005-06 RESPECTFULLY FOLLOWING THE D ECISION OF THE ITAT IN THAT YEAR WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW DEPRECIATION OF STOCK EXCHANGE MEMBERSHIP CARD. ACCORDINGLY THIS G ROUND OF APPEAL RAISED IN YEARS UNDER CONSIDERATION IS ALLOWED. 8. GROUND NO. 3 IS PERTAINING TO DISALLOWANCE OF SO FTWARE EXPENSES. 9. THE ASSESSEE HAD INCURRED AN EXPENDITURE AMOUNTI NG TO RS. 83 15 883/- ON COMPUTER SOFTWARE AND RELATED EXPENS ES WHICH WAS CON4SIDERED AS CAPITAL EXPENDITURE BY THE AO AND AF TER ALLOWING DEPRECIATION OF RS. 11 02 632/- @ 25% BALANCE OF R S. 72 13 251/- WAS DISALLOWED BY HIM. BEFORE THE CIT(A) THE ASSES SEE SUBMITTED THAT SOFTWARE BECOMES OBSOLETE VERY FAST AND REQUIRES CO NSTANT UPGRADATION AND MODIFICATION IN LINE WITH THE FAST CHANGING TECHNOLOGY AND METHODS AND THE SOFTWARE DOES NOT GI VEN ANY ENDURING BENEFIT THEREFORE THE SAID EXPENDITURE INCURRED B Y THE ASSESSEE IS ALLOWABLE AS REVENUE EXPENDITURE. THE CIT(A) FOLLOW ING THE DECISION OF THE ITAT CONFIRMED THE ACTION OF THE AO. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE ITAT. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 4 10. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT IN ASSESSE ES OWN CASE IN AY 2001-02 VIDE ITA NO. 2950/M/05 & 3842/M/05 ORDER D ATED 31 ST MARCH 2001 A COPY OF WHICH HAS BEEN FILED ON RECO RD. HE HAS ALSO SUBMITTED THAT THIS ISSUE IS ALSO COVERED BY THE DE CISION OF ITAT SPECIAL BENCH DELHI IN THE CASE OF AMWAY INDIA ENTE RPRISES VS. DCIT 111 ITD 112 (DEL)(SB). ON THE OTHER HAND THE LEARNE D DR DID NOT CONTROVERT THE FACTS ON RECORD. 11. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD WE FIND THAT ITAT IN AY 2001-0 2 (SUPRA) REMITTED THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTI ON TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISION OF SPECIAL BENC H IN THE CASE OF DCIT VS. AMWAY ENTERPRISES 111 ITD 112 (DEL)(SB) AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THAT OF AY 2001-02 WE RESPECTFULLY FO LLOW THE DECISION OF THE ITAT IN THAT YEAR AND IN THE LIGHT OF THAT WE S ET ASIDE THE ORDER OF CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH WITH IDENTICAL DIRECTION AS GIVEN BY T HE ITAT IN AY 2001- 02. ACCORDINGLY THIS GROUND OF APPEAL IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO. 4 PERTAINS TO DISALLOWANCE OUT OF R EPAIRS. 13. THE ASSESSEE HAD INCURRED EXPENDITURE OF RS. 41 60 736/- ON REPAIRS TO OFFICE PREMISES LOCATED AT MUMBAI BANGA LORE KOLKATTA COCHIN GOA & PUNE. THE SUBMISSION OF THE ASSESSEE BEFORE THE AO WAS THAT AFTER THE TENURE F THE LEASE THE ENTIRE B ENEFIT OF EXPENDITURE ON RENOVATION AND REPAIRS CEASES TO ACCRUE TO THE A SSESSEE. THE AO REJECTED THE SUBMISSION OF THE ASSESSEE DISALLOWED THE SAID EXPENDITURE BY TREATING IT AS CAPITAL EXPENDITURE. ON APPEAL THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO. A SSESSEE IS AGGRIEVED AND CARRIED THE MATTER IN APPEAL BEFORE T HE ITAT. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 5 14. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS BREAKING OF FLOORING FALSE CEILING PAINTI NG FALSE CEILINGS PARTITIONS ETC. DO NOT RESULT IN ANY ASSET OF ENDUR ING BENEFIT THEREFORE THE SAME IS ALLOWABLE AS REVENUE EXPENDI TURE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BIFURCA TION OF THE EXPENDITURE HAS BEEN FILED BEFORE THE AO. HE FURTHE R SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT IN AS SESSEES OWN CASE FOR AY 2001-02 (SUPRA) WHEREIN THE ITAT HELD AS UNDER:- 5. BREAKING OF FLOORING FALSE CEILING PAINTING F ALSE CEILINGS PARTITIONS ETC. DO NOT RESULT IN ANY ASSET OF ENDUR ING BENEFIT. THESE EXPENSES WERE INCURRED ON LEASED PREMISES WH ICH THE ASSESSEE AS LESSEE WOULD BE USING FOR A LIMITED PER IOD. THESE EXPENSES EVEN IF INCURRED IN ASSESSEES OWN PREMIS ES WOULD BE REVENUE EXPENSES. THESE ARE EXPENSES INCURRED FOR B ETTER CARRYING ON THE DAY TO DAY BUSINESS. HENCE THEY ARE IN THE NATURE OF REVENUE EXPENSES. THE DECISIONS IN THE CA SES OF CIT VS. KISHENCHAND CHELLARAM (I) LTD. (13) ITR 385) MA D) INSTALMENT SUPPLY P LTD. VS. CIT (149 ITR 52 DEL.) ALLIED METAL PRODUCTS VS. CIT (137 ITR 689 P&H) CIT VS. OOTY DA SAPRAKASH (237 ITR 902 MAD) CIT V. HI LINE PENS LTD. (306 IT R 182 (DEL) HAVE HELD THAT EXPENSES INCURRED FOR REDESIGNING AN D REFURBISHING OFFICE PREMISES ARE FOR CARRYING ON BU SINESS MORE PROFITABLY AND EFFICIENTLY AND ANY BENEFIT ACCRUING IS AN ADVANTAGE IN A COMMERCIAL SENSE AND HENCE SUCH EXPE NDITURE ARE REVENUE EXPENDITURE. HOWEVER EXPENDITURE INCURRED FOR ACQUIRING ASSETS LIKE CHAIRS TABLES ETC. WOULD CONSTITUTE EX PENDITURE FOR ACQUIRING CAPITAL ASSETS AND CANNOT BE ALLOWED AS R EVENUE EXPENDITURE. WE THEREFORE UPHOLD THE ORDER OF THE C IT(A) HOLDING RS. 15 78 972/- REPRESENTS CAPITAL EXPENDITURE. 15. ON THE OTHER HAND THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 16. AFTER HEARING BOTH THE SIDES WE FIND THAT THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THAT OF AY 2001-02 (S UPRA) WE RESPECTFULLY FOLLOW THE DECISION OF ITAT IN THAT YE AR AND IN THE LIGHT OF WE REMIT THE MATTER TO THE FILE OF THE AO WITH A DI RECTION TO DECIDE THE ISSUE BY EXAMINING THE EXPENDITURE INCURRED BY THE ASSESSEE WHETHER THE SAME ARE REVENUE IN NATURE OR CAPITAL IN NATURE AND ALLOW THE ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 6 EXPENDITURE IF REVENUE IN NATURE IN THE LIGHT OF THE DECISION OF ITAT IN AY 2001-02. NEEDLESS TO SAY THAT THE AO SHALL PR OVIDE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE M ATTER. ACCORDINGLY THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STA TISTICAL PURPOSES. 17. GROUND NO. 5 IS IN RESPECT OF DISALLOWANCE OF BAD DEBTS. 18. THE AO HAD DISALLOWED BAD DEBTS AMOUNTING TO RS . 58 76 826/- WHICH WAS DUE FROM VARIOUS PARTIES FOR THE SECONDAR Y MARKET TRANSACTIONS AND WAS CLAIMED BY THE ASSESSEE AS BAD DEBTS U/S 36(1)(VII) R.W.S. 36(2) OF THE ACT. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER:- .THE AO HAS ALSO EXPRESSED IN HIS FINDING THAT O UT OF THE BAD DEBTS WRITTEN OFF RS. 29 21 843/- IS CLAIMED AS COMMISSION INCOME RECOGNIZED AS INCOME IN EARLIER YEAR. THE BA LANCE AMOUNT OF RS. 1 33 58 579/- AS BAD DEBTS WRITTEN OFF PERTA INS TO CLIENT. IT IS FOUND BY THE AO THAT THE AMOUNT WRITTEN OFF I S MORE THAN THE INCOME EARNED/CREDITED IN THE PROFIT & LOSS ACCOUNT . ACCORDINGLY THE AO RESTRICTED THE CLAIM OF THE APPELLANT TO THE EXTENT OF INCOME EARNED/CREDITED IN THE PROFIT & LOSS ACCOUNT . THUS ALLOWABLE AMOUNT WAS WORKED AT RS. 74 81 754/- AND THE BALANCE AMOUNT OF RS. 58 76 825/- IS DISALLOWED.. 19. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE I S IN APPEAL BEFORE THE ITAT. 20. AT THE TIME OF HEARING BEFORE US THE LEARNED C OUNSEL FOR THE ASSESSEE HAS CANVASSED THAT THE ISSUE IS COVERED BY THE DECISION OF ITAT IN VARIOUS CASES INCLUDING THE ASESSEES OWN C ASE FOR AY 2001-02 (SUPRA) AND THE DECISION OF HIGH COURT AND THE SUPR EME COURT IN THE CASE OF TRF LTD. VS. CIT 323 ITR 397 (SC). THE LEAR NED DR DID NOT OBJECT THE SUBMISSIONS OF THE ASSESSEE. 21. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSING THE RECORD WE FIND THAT THE ITAT IN ASESS SEES OWN CASE FOR AY 2001-02 ALLOWED THE BAD DEBTS CLAIM OF THE ASES SSEE BY OBSERVING AS UNDER:- ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 7 7.WE FIND THAT THE ISSUE IS COVERED IN FAVOU R OF THE ASESSSEE BY THE DECISION OF THE SPECIAL BENCH OF TH E MUMBAI ITAT IN THE CASE OF SHREYAS S. MORAKHIA (2010) 40 SOT 44 0. RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI S PECIAL BENCH IN THE CASE OF SHREYAS MORAKHIA SUPRA WE ALLOW TH E ENTIRE AMOUNT OF RS. 34 91 528/- WRITTEN OFF BY THE ASSESS EE AS A BAD DEBT U/S 36(1)(VII). ASSESSEES APPEAL ON THIS ISSU E IS ALLOWED. 22. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICA L TO THAT OF Y 2001-02 WE RESPECTFULLY FOLLOW THE DECISION OF ITA T IN THAT YEAR AND IN THE LIGHT OF THAT WE SET ASIDE THE ORDER OF CIT( A) AND ALLOW THE BAD DEBTS CLAIM OF THE ASSESSEE. ACCORDINGLY THE GROUN D RAISED IN ALL THE THREE YEARS UNDER CONSIDERATION IS ALLOWED. 23. GROUND NOS. 6 & 7 HAVE NOT BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEF ORE US THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. 24. GROUND NO. 8 IS PERTAINING TO LEVY OF INTEREST U/S 234D OF THE ACT. 25. THE ASSESSEE HAD RECEIVED REFUND OF RS. 27 90 6 74/- ON 29/08/03 AND RS. 10 25 030 ON 30/09/03 WHICH WERE WITHDRAWN IN THE REASSESSMENT PROCEEDINGS ON ACCOUNT OF VARIOUS ADDITIONS/DISALLOWANCES. THE AO CHARGED INTEREST U/ S 234D ON THE SAID AMOUNTS. ON APPEAL BEFORE THE CIT(A) THE ASSE SSEE HAD SUBMITTED THAT SECTION 234D CAME INTO EFFECT FROM 1 ST JUNE 2003. THE PROVISIONS OF SECTION 234D DO NOT APPLY TO ASSESSME NT YEAR IN QUESTION. IT WAS CONTENDED THAT THE LAW DEALING WIT H IMPOSITION OF INTEREST IS SUBSTANTIVE AND NOT PROCEDURAL LAW AND THEREFORE INTEREST UNDER S. 234D CANNOT BE CHARGED IN RESPECT OF ASSES SMENT YEARS PRIOR TO COMING INTO FORCE OF THESE PROVISIONS I.E. 2004- 05. HOWEVER THE CIT(A) HELD THAT EXPLANATION TO SECTION 2343D CLARI FIES WHERE IN RELATION TO AN ASSESSMENT YEAR AN ASSESSMENT IS MA DE FOR THE FIRST TIME UNDER SECTION 147 OR SECTION 153A THE ASSESSM ENT SO MADE SHALL ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 8 BE REGARDED AS A REGULAR ASSESSMENT FOR THE PURPOSE OF THIS SECTION. HE THEREFORE CONFIRMED THE ACTION OF THE AO FOLLO WING THE DECISION OF ITAT IN THE CASE OF SARDAR SAROVAR NIGAM 93 ITD 32 1 (AHD.). AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS I N APPEAL BEFORE THE ITAT. 26. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISIONS IN THE CASE OF ITO VS. EK TA PROMOTERS LTD. 113 ITD 719(DELHI)(SB) AND DIT VS. M/S JACOBS CIVIL INCORPORATED 333 ITR 578 (DEL). THE LEARNED DR ON THE OTHER H AND HAS RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 27. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE DECI SIONS CITED. WE FIND THAT THE SPECIAL BENCH OF ITAT DELHI IN THE C ASE OF EKTA PROMOTERS LTD. HELD THAT ..THE INTEREST UNDER SECTION 234D WAS CHARGEABLE FROM THE ASSESSMENT YEAR 2004-05 AND IT COULD NOT BE CHARGED FOR EARLIER YEARS EVEN THOUGH REGULAR ASSES SMENTS FOR THOSE YEARS WERE FRAMED AFTER 01/06/2003 OR THE REFUND WA S GRANTED FOR THOSE YEARS AFTER THE SAID DATE. THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S JACOBS CIVIL INCORPORATED (SUPRA) H ELD THAT SECTION 234D IS APPLICABLE ONLY FROM THE ASSESSMENT YEAR 20 04-05 ONWARDS AND NOT IN THE EARLIER ASSESSMENT YEARS AND THEREFO RE NO INTEREST UNDER THAT PROVISION COULD BE LEVIED FOR THE PERIOD PRIOR TO THE ASSESSMENT YEAR 2004-05. SINCE THE ASSESSMENT YEAR UNDER CONSIDERATION IS AY 2002-03 SECTION 234D IS NOT APPLICABLE TO THE CASE OF THE ASESSSEE THEREFORE WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE PENALTY LEVIED U/S 234D OF THE ACT. ACCORDINGLY THIS GROUN D OF APPEAL OF THE ASSESSEE IS ALLOWED. 28. IN THE RESULT APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 9 ITA NO. 1501/M/07 FOR AY 2003-04 29. GROUND NO. 1 IS IN RESPECT OF DISALLOWANCE OF D EPRECIATION ON THE FIRST STOCK EXCHANGE MEMBERSHIP CARD. SIMILAR G ROUND IS ADJUDICATED BY US IN AY 2002-03 IN GROUND NO. 2 (SU PRA). SINCE THIS GROUND IS MATERIALLY IDENTICAL TO THAT OF AY 2002-0 3 FOLLOWING THE CONCLUSIONS DRAWN THEREIN WE SET ASIDE THE ORDER O F CIT(A) AND ALLOW DEPRECIATION OF STOCK EXCHANGE MEMBERSHIP CARD. THI S GROUND IS ALLOWED. 30. GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE OUT OF OFFICE REPAIRS & MAINTENANCE OF RS. 59 76 254/-. THIS GROUND IS AL SO SIMILAR TO THE GROUND NO. 4 IN AY 2002-03. RESPECTFULLY FOLLOWING THE CONCLUSIONS DRAWN THEREIN WE UPHOLD THE ORDER OF CIT(A) IN CON FIRMING THE DISALLOWANCE OUT OF REPAIRS AND MAINTENANCE AND DIS MISS THIS GROUND. 31. GROUND NO. 3 IS IN RESPECT OF DISALLOWANCE OF B AD DEBTS AMOUNTING TO RS. 10 65 964/-. 32. THE AO DISALLOWED BAD DEBTS AMOUNTING TO RS. 10 65 904/- WHICH WAS DUE FROM VARIOUS PARTIES FOR THE SECONDAR Y MARKET TRANSACTIONS AND WAS CLAIMED BY THE ASSESSEE AS BAD DEBTS U/S 36(1)(VII) R.W.S. 36(2) OF THE ACT ON THE GROUND T HAT IT DOES NOT FULFIL THE CONDITIONS OF SEC. 36(2). ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO. 33. IN AY 2002-03 SIMILAR GROUND RAISED BY THE ASSE SSEE AS GROUND NO. 5 AND THE SAME HAS BEEN DECIDED BY US (SUPRA). SINCE THE ISSUE IS IDENTICAL TO THAT OF THE GROUND RAISED BY THE ASSES SEE IN AY 2002-03 WE RESPECTFULLY FOLLOW THE DECISION THEREIN AND IN THE LIGHT OF THAT WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE BAD DEB TS CLAIM OF THE ASSESSEE. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 10 34. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 1502/M/07 FOR AY 2004-05. 35. GROUND NO. 1 IS IN RESPECT OF DISALLOWANCE OF D EPRECIATION ON THE FIRST STOCK EXCHANGE MEMBERSHIP CARD. SIMILAR G ROUND IS ADJUDICATED BY US IN AY 2002-03 IN GROUND NO. 2 (SU PRA). SINCE THIS GROUND IS MATERIALLY IDENTICAL TO THAT OF AY 2002-0 3 FOLLOWING THE CONCLUSIONS DRAWN THEREIN WE SET ASIDE THE ORDER O F CIT(A) AND ALLOW DEPRECIATION OF STOCK EXCHANGE MEMBERSHIP CARD. THI S GROUND IS ALLOWED. 36. GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE OF B AD DEBTS. 37. 31. THE AO DISALLOWED BAD DEBTS AMOUNTING TO RS . 14 20 899/- WHICH WAS DUE FROM VARIOUS PARTIES FOR THE SECONDARY MARKET TRANSACTIONS AND WAS CLAIMED BY THE ASSESSEE AS BAD DEBTS U/S 36(1)(VII) R.W.S. 36(2) OF THE ACT ON THE GROU ND THAT IT DOES NOT FULFIL THE CONDITIONS OF SEC. 36(2). ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO. 38. IN AY 2002-03 SIMILAR GROUND RAISED BY THE ASSE SSEE AS GROUND NO. 5 AND THE SAME HAS BEEN DECIDED BY US (SUPRA). SINCE THE ISSUE IS IDENTICAL TO THAT OF THE GROUND RAISED BY THE ASSES SEE IN AY 2002-03 WE RESPECTFULLY FOLLOW THE DECISION THEREIN AND IN THE LIGHT OF THAT WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE BAD DEB TS CLAIM OF THE ASSESSEE. 39. GROUND NO. 3 IN AY 2004-05 IS PERTAINING TO LEV Y OF INTEREST U/S 234C OF THE ACT. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 11 40. THE AO LEVIED INTEREST U/S 234C OF THE ACT AT R S. 59 78 046/- OF THE ACT. ON APPEAL BEFORE THE CIT(A) THE CONTENTIO N OF THE AR OF THE ASSESSEE IS THAT THE ASSESSEE MADE ITS ESTIMATES AT VARIOUS STAGES OF PAYING ADVANCE TAX BONAFIDE AND WITH DUE CARE AND O N THE BASIS OF THE FACTS AND INFORMATION AVAILABLE TO IT AT THE TI ME OF MAKING RESPECTIVE ESTIMATES AND MADE THE PREVIOUS SHORTFAL L GOOD EVERY TIME THE UPWARD ESTIMATE WAS MADE. HE FURTHER SUBMITTED THAT IT HAD EARNED MAJOR INCOME ONLY DURING THE LAST QUARTER AN D SURGE IN COME WAS TOTALLY UNEXPECTED AND COULD NOT HAVE BEEN ANTI CIPATED AT ALL AT THE TIME OF PAYING EARLIER INSTALLMENTS. AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) CONFIRMED T HE ACTION OF THE AO BY OBSERVING AS UNDER:- 6.9 I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMI SSIONS. THE PROVISION OF SECTION 234C ARE VERY CLEAR AND PROVID E THAT INTEREST U/S 234C OF THE IT ACT IS CHARGEABLE WHEN THE ADVAN CE TAX PAID ON THE CURRENT INCOME ON VARIOUS DUE DATES FOR PAYM ENT OF ADVANCE TAX FALLS LOWER THAN CERTAIN PERCENTAGE OF TAX DUE ON THE RETURNED INCOME. THE SECTION DOES NOT GIVE ANY DISC RETION TO THE AO NOT TO CHARGE INTEREST U/S 234C UNDER ANY CIRCUM STANCES IN CASE THERE IS SHORT FALL IN THE PAYMENT OF ADVANCE TAX IN RESPECT OF VARIOUS INSTALMENTS EXCEPT DUE TO CAPITAL GAINS OR INCOME REFERRED TO IN 2(24)(IX) OF IT ACT. EVIDENTLY THE CASE OF THE APPELLANT IS NOT COVERED BY THE AFORESAID EXCEPTION S. FURTHER IN THE CASE OF CIT VS. ANJUM GHASWALA & OTHERS 252 ITR 1 (SC) THE APEX COURT HELD THAT THE INTEREST CHARGEABLE U/S 23 4A 234B AND 234C IS MANDATORY IN NATURE AND THERE WAS NO POWER TO REDUCE OR WAIVE THE SAME EXCEPT IN THE CONDITIONS AS PRESC RIBED UNDER CBDT CIRCULARS. AS THE APPELLANTS CASE WAS NOT COV ERED IN ANY SUCH CONDITIONS THE AO WAS JUSTIFIED LEVYING INTER EST U/S 234C OF THE ACT. ACCORDINGLY THIS GROUND OF APPEAL IS R EJECTED. 41. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 42. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSE E HAS SUBMITTED THAT THE ASSESSEE HAS NOT COMMITTED ANY DEFAULT FOR PAYMENT OF ADVANCE TAX AND THEREFORE CHARGING INTEREST U/S 2 34C IS NOT JUSTIFIED. THE PAYMENT OF ADVANCE HAS TO BE CALCULA TED BASED ON THE ESTIMATION OF THE TAX THAT HAS TO BE PAID BY THE AS SESSEE. IT IS ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 12 SUBMITTED THAT IT HAD EARNED MAJOR INCOME ONLY DURI NG THE LAST QUARTER AND SURGE IN COME WAS TOTALLY UNEXPECTED AN D COULD NOT HAVE BEEN ANTICIPATED AT ALL THEREFORE IT IS DIFFICULT TO ANTICIPATE WHAT HAS TO BE PAID. IN SUPPORT OF ASSESSEES CASE THE LEAR NED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS: 1. PRIYANKA OVERSEAS LTD. VS. DCIT 79 ITD 353 (DE L.) 2. CIT VS. REVATHI EQUIPMENTS LTD. 298 ITR 67 (MA D) 3. CIT VS. SEDCO FOREX INTERNATIONAL DRILLING CO. L TD. 264 ITR 320 (UTT) 4. CIT VS. READING & BATES EXPLORATION CO. 278 ITR 47 (UTT) 5. HARYANA WAREHOUSING CORPN.V. DCIT 75 ITD 155 (D EL) 6. HIND PRODUCTS PVT. LTD. V. CIT 121 ITR 903 (BOM) 43. IN ADDITION TO THE ABOVE DECISIONS THE LEARNED COUNSEL HAS MAINLY RELIED UPON THE JUDGMENT OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF PRIME SECURITIES LTD. VS. ACIT [201 1] 333 ITR 464 (BOM.) 44. ON THE OTHER HAND THE LEARNED DR HAS RELIED UP ON THE ORDERS OF THE REVENUE AUTHORITIES. 45. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW AND THE DECISIONS CITED. IT IS OB SERVED THAT THE AO CHARGED INTEREST U/S 234C OF THE ACT ON THE GROUND OF SHORTFALL IN THE PAYMENT OF ADVANCE TAX BY THE ASSESSEE. THE CIT(A) CONFIRMED THE ACTION OF THE AO FOLLOWING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. ANJUM GHASWALA & OTHERS 252 ITR 1(SC). IN THE CASE OF PRIME SECURITIES LTD. (SUPRA) ON WHICH RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE THE HONBLE J URISDICTIONAL HIGH COURT HELD AS UNDER:- HELD ALLOWING THE APPEAL THAT INTEREST IS PAYABLE U/S 234B IF THE ADVANCE TAX IS NOT PAID IN CONSONANCE WITH THE LAW IN FORCE AT THE TIME WHEN THE ADVANCE TAX IS PAID AND THERE IS A DEFAULT. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 13 THEREFORE FOR CHARGING INTEREST U/S 234B DEFAULT IN PAYMENT OF ADVANCE TAX IS THE CONDITION PRECEDENT. FOR THE PUR POSE OF PAYMENT OF ADVANCE TAX THE ASSESSEE HAS TO ESTIMATE HIS CURRENT INCOME AND THEN CALCULATE INCOME-TAX ON THAT INCOME AT THE RATE IN FORCE IN THE FINANCIAL YEAR. THUS THE AMOUNT OF ADVANCE TAX IS TO BE DECIDED BY THE ASSESSEE AFTER ESTIMATING HIS CURRENT INCOME AND THEN APPLYING THE LAW IN FORCE FOR DECIDING THE AMOUNT OF TAX. ADMITTEDLY ON THE DATE ON WHICH THE ASSESSEE PAID THE ADVANCE TAX IT HAD ESTIMATED ITS INCOME AND LIABILITY FOR P AYMENT OF ADVANCE TAX IN ACCORDANCE WITH LAW THAT WAS IN FORC E. THEREFORE THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO PAY ADVANCE TAX IN ADVANCE WITH THE PROVISIONS OF SECTION 208 A ND 209. THE ASSESSEE WAS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO ANTICIPATE THE EVENTS THAT WERE TO TAKE PLACE IN THE NEXT FINANCIAL YEAR AND P AY ADVANCE TAX ON THE BASIS OF THOSE ANTICIPATED EVENTS. THE AMOUN T OF INTEREST RECOVERED FROM THE ASSESSEE WAS TO BE REFUNDED WITH INTEREST IN ACCORDANCE WITH LAW. 46. THE HONBLE JURISDICTIONAL HIGH COURT IN THE AB OVE CASE FURTHER OBSERVED THAT IN OUR OPINION WHEN THE SUPREME COUR T IN GHASWALAS CASE [2001] 252 ITR 1 SAYS THAT CHARGING OF INTERES T UNDER SECTION 234B IS MANDATORY WHAT IS REALLY MEANS IS THAT ONC E THE ASSESSEE IS FOUND LIABLE TO PAY INTEREST THEN RECOVERY OF INTE REST IS MANDATORY AND RECOVERY OF THE INTEREST CANNOT BE WAIVED FOR A NY REASON. BUT FOR CHARGING INTEREST UNDER THAT SECTION IT HAS TO BE ESTABLISHED THAT THE ASSESSEE HAS COMMITTED DEFAULT IN PAY MENT OF ADVANCE TAX. IN THE CASE UNDER CONSIDERATION NEITHER THE AO NOR THE CIT(A) HAS EXAMINED AND BROUGHT ON RECORD THAT THE ASSESSEE HA S COMMITTED DEFAULT IN PAYMENT OF ADVANCE TAX. AFTER CONSIDERIN G THE FACTS OF THE CASE AND IN VIEW OF THE DECISION OF THE JURISDICTIO NAL HIGH COURT IN THE CASE OF PRIME SECURITIES LTD. (SUPRA) WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE AND DECIDE THE ISSUE IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF PRIME SECURITIES LTD. (SUPRA) AFTER GIV ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 3272 1501 & 1502/M/2007 KOTAK SECURITIES LTD. 14 47. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. 48. TO SUM UP APPEAL BEING 3272/M/06 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES APPEAL BEING 1501 /M/07 IS ALLOWED AND THE APPEAL BEING 1502/M/07 IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2011. SD/- SD/- (J. SUDHAKAR REDDY) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 27 TH JULY 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE A BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.