EMKAY GLOBAL FINANCAIL SERVICES LTD, MUMBAI v. ADDL CIT RG 4(1), MUMBAI

ITA 5150/MUM/2011 | 2008-2009
Pronouncement Date: 10-07-2013 | Result: Partly Allowed

Appeal Details

RSA Number 515019914 RSA 2011
Assessee PAN AAACE0994L
Bench Mumbai
Appeal Number ITA 5150/MUM/2011
Duration Of Justice 2 year(s) 6 day(s)
Appellant EMKAY GLOBAL FINANCAIL SERVICES LTD, MUMBAI
Respondent ADDL CIT RG 4(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 10-07-2013
Date Of Final Hearing 10-07-2013
Next Hearing Date 10-07-2013
Assessment Year 2008-2009
Appeal Filed On 04-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI . . !'# $ % BEFORE SHRI I.P. BANSAL JM AND SHRI N.K. BILLA IYA AM ./I.T.A. NO. 5150/MUM/2011 ( & & & & / ASSESSMENT YEAR :2008-09 M/S. EMKAY GLOBAL FINANCIAL SERVICES LTD. 4D 4 TH FLOOR HAMAM HOUSE AMBALAL DOSHI MARG FORT MUMBAI-400 023 THE ACIT RANGE-4(1) MUMBAI ' $ ./ () ./PAN/GIR NO. :AAACE 0994L ( '* /APPELLANT ) .. ( + '* / RESPONDENT ) '* - / APPELLANT BY : ` SHRI SANJIV M. SHAH + '* . - /RESPONDENT BY : SHRI GIRIJA DAYAL . /0$ / DATE OF HEARING :10.07.2013 12& . /0$ / DATE OF PRONOUNCEMENT : 10.07.2013 3 / O R D E R PER N.K. BILLAIYA AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-8 MUMBAI DT.18.5 2011 PERTAINING TO A.Y. 2 008-09. 2. THE ASSESSEE HAS RAISED 4 SUBSTANTIVE GROUNDS OF APPEAL AND HAS ALSO FILED ONE ADDITIONAL GROUND OF APPEAL. GROUND NO. 1 RELATES TO DISALLOWANCE OF BAD DEBTS OF RS. 36 14 782/- ARISIN G OUT OF SHARE BROKERAGE BUSINESS AND ADVISORY FEES. ITA NO.5150/M/2011 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DE BITED AN AMOUNT OF RS. 36 14 782/- AS BAD DEBT IN ITS PROFITS & LOSS ACCO UNT. THE ASSESSEE WAS ASKED TO EXPLAIN WHY BAD DEBT OF RS. 36 14 782/- SH OULD NOT BE DISALLOWED AS IT IS NOT ARISING FROM THE BROKERAGE. THE ASSESSEE FILED A DETAILED REPLY DT. 23.10.2010. THE RELEVANT PART HA S BEEN INCORPORATED BY THE AO IN HIS ORDER AT PARA 17.1. TO 17.6 OF HIS OR DER. THE AO DID NOT ACCEPT THE SUBMISSIONS MADE BY THE ASSESSEE. THE A O WAS OF THE FIRM BELIEF THAT AS PER THE PROVISIONS OF SEC. 36(1)(VII ) THE WORD BAD HAS BEEN USED IN CONJUNCTION WITH THE WORD DEBT. T HEREFORE IN ORDER TO HAVE RECOURSE TO SECTION 36(1)(VII) OF THE ACT BE FORE WRITING IT OFF IN THE BOOKS OF ACCOUNT THE AO HAS TO BE CONVINCED THAT THE DEBT HAS BECOME BAD. THE AO THEREAFTER WENT ON TO REFER TO CIRCU LAR NO. 551 DT. 23.1.1990 ISSUED BY CBDT. THE AO WAS OF THE OPINIO N THAT THE ALLOWABILITY OF SECTION 36(1)(VII) IS GOVERNED BY S ECTION 36(2) OF THE ACT WHEREIN IT HAS BEEN PROVIDED THAT UNLESS SUCH DEBT OR PART THEREOF HAVE BEEN INCLUDED IN THE COMPUTATION OF INCOME OF PREV IOUS YEAR OR EARLIER PREVIOUS YEARS IT CANNOT BE ALLOWED AS BAD DEBT U/ S. 36(1)(VII). CONSIDERING THE FACTS IN THE LIGHT OF THE PROVISION S OF SEC. 36(1)(VII) VIS- -VIS 36(2) OF THE ACT THE AO DISALLOWED THE BAD D EBT OF RS. 36 14 782/- . 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT A SIMILAR ISSUE AROSE DURING A.Y. 2003-04 IN WHICH THE TRIBUN AL IN ITA NOS. 6562/M/06 & 6741/M/06 HAS ALLOWED THE CLAIM OF BAD DEBT. ITA NO.5150/M/2011 3 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AND THE DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE (SUPRA). WE FIND THAT ON IDENTICAL ISSUE THE TRIBUNAL AT PAGE-3 PARA- 8 OF ITS ORDER HAS RELIED UPON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF SHREYAS S. MORAKHIA REPORTED IN 131 TTJ 641 WHI CH HAS NOW BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT IN 342 ITR 285. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL AND THE HONBLE JURISDICTIONAL HIGH COURT WE DIRECT THE AO TO ALLO W THE CLAIM OF BAD DEBT. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 8. IN GROUND NO. 2 3 & 4 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE ISSUES WERE BEFORE THE LD. CIT(A) VIDE G ROUND NO. 4 5 & 6 OF FORM NO. 35. IT IS THE SAY OF THE LD. COUNSEL THAT THE LD. CIT(A) HAS NOT ADJUDICATED THESE ISSUES SOLELY ON THE FACT THAT AS SESSEES APPLICATION U/S. 154 OF THE ACT. DT. 10.1.2011 IS PENDING BEFORE THE AO AND HELD THAT SINCE APPLICATION U/S. 154 SEEKING IDENTICAL RELIEF IS PE NDING THE APPEAL IS NOT MAINTAINABLE. WE DO NOT AGREE WITH THIS FINDING OF THE LD. CIT(A). THE LD. CIT(A) OUGHT TO HAVE ADJUDICATED THE GRIEVANCE OF THE ASSESSEE RAISED VIDE GROUND NO. 4 5 & 6 OF FORM NO. 35 IRRESPECTIVE OF THE PENDENCY OF APPLICATION U/S. 154 OF THE ACT. WE THEREFORE RE STORE THESE ISSUES VIDE GROUND NO. 2 3 & 4 OF THE PRESENT APPEAL BACK TO TH E FILES OF THE LD. CIT(A). THE LD. CIT(A) IS DIRECTED TO ADJUDICATE O N THE ISSUES RAISED BEFORE HIM VIDE GROUND NO. 4 5 & 6 OF FORM NO. 35. GROUND NO. 2 3 & 4 OF THE PRESENT APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 9. THE ASSESSEE HAS ALSO RAISED ONE ADDITIONAL GROU ND RELATING TO THE DISALLOWANCE OF RS. 8 74 863/- U/S. 14A OF THE ACT. ITA NO.5150/M/2011 4 10. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME BUT DID NOT ALLOCATE ANY EXPENSE TOWARDS EARNING EXEMPT INCOME. AFTER S EEKING CLARIFICATION FROM THE ASSESSEE THE AO WENT ON TO APPLY RULE 8D AND COMPUTE THE DISALLOWANCE AT RS. 8 81 461/-. 11. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). THE LD. CIT(A) WHILE CONFIRMING THE FINDING OF THE AO DIREC TED THE AO TO REDUCE THE AMOUNT OF DISALLOWANCE BY RS. 6 598/-. 12. AGGRIEVED BY THIS FINDING THE ASSESSEE IS BEFO RE US. IT IS THE SAY OF THE LD. COUNSEL THAT THE AO HAS NOT CONSIDERED THE WORKING OF DISALLOWANCE GIVEN BY THE ASSESSEE DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS. 13. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT NO SUCH DISALLOWANCE HAS BEEN MADE BY THE ASSESSEE WHILE CO MPUTING THE INCOME FOR THE YEAR UNDER CONSIDERATION. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS IN OUR HUMBLE OPINION THE ISSUE DESERVES TO BE LOOKED AFRESH BY THE AO. WE THEREFORE RESTORE THIS ADDITIONAL GROUND BACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO CONSIDER THE COMPUTATION OF DISALLOWANCE MADE BY TH E ASSESSEE BEFORE INVOKING PROVISIONS SEC. 14A R.W.RULE 8D OF THE ACT . THE AO EXPECTED TO GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.5150/M/2011 5 ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 15. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 10.7.2013 . 3 . 2& $ 4 56 10.7.2013 2 . 7 SD/- SD/- (I.P. BANSAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 10 /07/2013 . . ./ RJ SR. PS 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. + '* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ / DR ITAT MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) / ITAT MUMBAI