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2022 (9) TMI 969 - Income Tax
Depreciation on intangible assets - HELD THAT:- The issue in dispute is a recurring issue coming to the assessee from A.Y.1999-2000 onwards. We find that the same is covered in favour of the assessee by the order of this Tribunal for A.Y.1999-2000 wherein by placing reliance on the decision of the Hon”ble Supreme Court in the case of CIT vs. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] this Tribunal had already granted depreciation on the intangible assets to the assessee. Similar depreciation was allowed to the assessee upto A.Y.2010-11.
We find that the ld. CIT(A) after narrating the entire facts of his order had placed reliance on the orders passed by his predecessor for A.Yrs. 2003-04 to 2010-11 and had granted relief to the assessee - AR before us placed on record the consolidated Tribunal order passed for A.Yrs. 1999-00 to 2010-11 in the case of the assessee wherein this issue is covered in favour of the assessee. Respectfully following the said Tribunal order, the ground No.1 raised by the Revenue is dismissed.
Disallowance of assessee's claim of exceptional losses on account of certain trades - HELD THAT:- We are unable to persuade ourselves to accept to this argument of the AR in view of the fact that the clients had incurred losses due to neglect of ABML. Hence it is the goodwill of ABML that would be ruined and not the assessee. Hence there is no question of retention of goodwill for which this loss was absorbed by the assessee. Even assuming if the goodwill of the assessee is to be retained by keeping its clients in good humor by absorbing their losses, the assessee should have recovered the said loss from ABML as admittedly the loss had been incurred only due to neglect of ABML and not the assessee herein. In any event, there is absolutely no justification for the assessee to claim the said loss in its books as deduction. Hence we deem it fit and appropriate to address the entire issue on the first principle basis without placing reliance on any decisions. The ratio laid down in each of the decision is to be seen from the facts prevailing in those cases and could be made applicable only for those facts. Hence the various decisions relied upon by the ld. AR on the aspect of commercial expediency principle and the loss being allowable as trading loss of the assessee either u/s 28 or u/s 37 of the Act would not advance the case of the assessee.
AR before us also submitted that the losses incurred by clients of ABML in Options Maxima Scheme were not due to any neglect of ABML and it was caused due to various other factors which were outside the control of ABML. We find that ABML is only the main broker who had developed Options Maxima Scheme and offered it to its clients pursuant to Risk Disclosure Document signed by the clients in favour of ABML. Actually if there is any loss incurred on the said transaction, the same shall have to be borne only by the clients. Even if the clients losses are to be indemnified, it is for ABML to absorb those losses in its books. Merely because those clients had been sourced or referred by assessee to ABML, the losses of those clients cannot be shifted by ABML to assessee by placing reliance on Clause 2.1A of Business Partner Agreement dated 23.08.2010.
We hold that the loss of clients incurred under Options Maxima Scheme claimed by the assessee in its return is not allowable and accordingly we reverse the findings of the ld. CIT(A) in this regard and uphold the findings of the ld. AO on the impugned issue. Accordingly, the Ground Nos. 2 & 3 raised by the revenue are allowed.
Disallowance on account of assessee's claim on account of loss arising out of irregularities committed by certain employees - whether the losses had occurred due to embezzlement carried out by employees of assessee or employees of ABML? - HELD THAT:- This matter requires factual verification which would decide the issue in dispute before us. The reliance placed on the decision of Badridas Daga [1958 (4) TMI 2 - SUPREME COURT] would certainly come to the rescue of the assessee, if the employee of the assessee had embezzled . On the contrary, if the employee of ABML had done some mischief, then the said loss though borne by the assessee on behalf of the clients should have to be recovered from ABML by the assessee. Hence the allowability of loss could be decided on the facts being brought on record in this regard. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to remand this issue to the file of ld. AO for deciding in accordance with law in the light of aforesaid directions. Ground No. 4 raised by the revenue is allowed for statistical purposes.
TDS u/s 194J - Disallowance of provision made for expenses u/s.40(a)(ia) - HELD THAT:- We find that the Tribunal had stated that the said expenses are cost to cost payments falling under the ambit of reimbursement. In that context, it was decided that TDS would not be applicable thereon. Whereas for the year under consideration, we find that assessee had never taken a plea that it is reimbursement of expenses. Even in the statement of facts filed before the CIT(A), the assessee had only stated that these are provisions for expenses made on best estimate basis and tax would be deducted at the time of making actual payment thereon. Hence, we hold that reliance placed on the decision of this Tribunal in assessee”s own case would not come to the rescue of the assessee. However, in the interest of justice, we hold that assessee would be liable for deduction of this expenditure in the year in which the tax deducted at source had been duly remitted to the account of the Central Government. Accordingly, the ground raised in the cross objection of the assessee is partly allowed.