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M/s. Sharekhan Ltd. Versus The ACIT, CC – 22, Aaykar Bhavan, Mumbai

2015 (6) TMI 168 - ITAT MUMBAI

Depreciation on the BSE Membership card disallowed - Held that:- This issue is covered against the assessee by the decision of Hon’ble Bombay High Court in the case of CIT vs. Techno Shares and Stock Ltd. & Others, [2009 (9) TMI 18 - BOMBAY HIGH COURT] wherein held that depreciation is not allowable on the BSE Membership Card as it does not fall in any of the categories specified in section 32(1) of the Income Tax Act 1961 (the Act). - Decided against assesse.

Non compete fee - whethe .....

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of Ld. CIT(A). - Decided against assesse and revenue.

Disallowance of bad debts written off in the P&L account - Held that:- The brokerage having been credited to the P&L account of the assessee, it was evident that a part of the debt was taken into account in computing the income of the assessee. The fact that the liability to pay brokerage may arise at a point in time anterior to the liability to pay the value of the shares transacted would not make any material difference to the p .....

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s in respect of transactions effected by him on behalf of his clients - Decided against revenue.

Bad debts as trading loss being unrecoverable from the clients - Held that:- Right from the assessment proceedings it was the case of the assessee that the impugned loss has occurred to the assessee in respect of error trade. Due to dispute with the clients, for the transaction, it does not change the relation of principal and the agent. The assessee for business consideration chooses not .....

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een taken that loss occurred to share broker on account of client disowning transaction is business loss and not speculative loss. Therefore, we are of the opinion that Ld. CIT(A) did not commit any error in accepting the claim of the assesse - Decided against revenue.

Disallowance u/s 14A r.w.r. 8D - assessee earned dividend income which was claimed to be exempt under section 10(33) - held that:- There is no infirmity in the order passed by Ld. CIT(A) vide which he has directed the A .....

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assed by Ld. CIT(A) dated 29/11/2010 for assessment year 2007-08. Grounds of appeal read as under: Assessee s Grounds of appeal: 1. Under the facts and circumstances of your appellant, the Learned CIT(A) has erred in confirming the addition made by the Learned A.O. of ₹ 24,20,059/- being claim of depreciation on the BSE Membership card. 1.01. the Learned CIT (A) has erred in holding that the trading rights of BSE card were, therefore, extinguished and the new shareholder were given trading .....

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ur appellant, the Learned CI'T (A) has erred in confirming the addition made by Learned A.O. in disallowing the advances given for customizing the software ₹ 5,05,000/.- 2.01. Without prejudice to the above grounds of appeal, the Learned CIT (A) has erred in stating that no details on the software scrap have been submitted by the assessee. 2.02.Without prejudice to the ground No 2 & 2.0], the Learned CIT (A) has erred in rejecting our alternate claim to allow software scrap of S .....

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us sub broker. Revenue s Grounds of Appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions amounting to ₹ 1,20,25,2881 - relying on the decision of the Hon'ble ITAT Spl. Bench in the case of Shreyas S Morakhia ignoring the fact that the same is not accepted by the Department. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition amounting to ₹ 2,23,77,5231- wi .....

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enses u/s. 14A reasonably and not in accordance with Rule 80 of the I.T. Rules 1962. Assessee s Appeal & Ground No.3 of Revenue s Appeal: 2. Ground No.1 is against the addition upheld by Ld. CIT(A) in respect of depreciation claimed on BSE Membership Card. During the course of hearing, it was fairly conceded by Ld. AR that this issue is covered against the assessee by the decision of Hon ble Bombay High Court in the case of CIT vs. Techno Shares and Stock Ltd. & Others, 323 ITR 69, where .....

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ear under consideration assessee has paid noncompete fee to the following parties: S.No. Name of the Parry Amount 1. Shailesh Tanna 112,000 2. Paras Popat 500,000 3. Vignaharth Investment & Finance Co Pvt. Ltd. 500,000 4. Nexus Security 300,000 5 Kuber Securities 50,000 6. R Anilkumar 100,000 7. Samyak Consultancy 300,000 8. J Arun 300,000 9. V L Associates 300,000 10. Rajaram Muthukumar 200,000 TOTAL 2,662,000 The aforementioned amount was claimed as revenue expenditure on the ground that a .....

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n the same. Ld. CIT(A) has examined various clauses of the agreement entered into by the assessee for non competition and after considering the submissions of the assessee has arrived at a conclusion that in view of the decision of Special Bench in the case of Techmseh vs. Addl. CIT, ITA No.3759/Del/2003 A.Y. 1998-99 order dated 30.07.2010 the case of the assessee cannot be accepted for allowability of this expenditure as revenue expenditure. He observed that non-compete right acquired by the as .....

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sibilities, one is to allow expenditure as revenue expenditure; second possibility is to allow depreciation and third possibility is to amortize the expenditure into three years and allow the same as 1/3rd in each year. He submitted that the period of non-compete fee is three years, therefore, it will require amortization. He submitted that assessee is satisfied if depreciation is granted. For claiming depreciation on amount paid as non-compete fee Ld. AR relied upon the following decisions. 1. .....

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t been considered as capital asset for the purpose of grant of depreciation in section 32 of the Act. 5. We have heard both the parties and their contentions have carefully been considered. We have also gone through the decisions relied upon by Ld.AR. While allowing depreciation Ld. CIT(A) has relied upon the decision of ITAT Chennai in the case of Medicon Technologies Ltd(supra) and Real Image Tech Pvt. Ltd.(supra). In the case of Real Image Tech Pvt. Ltd,. it has been held that commercial righ .....

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, the same was directed to be allowed as revenue expenditure over a period of four years. 5.1 In this view of the situation, as Ld. AR has expressed his satisfaction only with grant of depreciation as has been allowed by Ld. CIT(A)and also in view of the fact that Ld. DR could not cite any decision to contradict that proposition, we are of the opinion that Ld. CIT(A) did not commit any error in holding that assessee was entitled to get depreciation on the amount paid by it as non-compete fee. Ac .....

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n of Special Bench in the appeal filed by the Revenue and reference was made to the decision in the case of CIT vs. Shreyas S.Morarkia, 342 ITR 285(Bom). 6.1 Ld. AO disallowed a sum of ₹ 1,18,82,970/-, ₹ 90,035 and ₹ 52,283/-,which were claimed as bad debts written off in the P&L account. Ld. CIT(A) allowed the same on the basis of Special Bench decision in the case of Shreyas S. Morarkhia (supra). Against the aforementioned decision of Special Bench, the Revenue took up th .....

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a point in time anterior to the liability to pay the value of the shares transacted would not make any material difference to the position. Both constitute a part of the debt which arises from same transaction involving the sale or, as the case, purchase of shares. Since both form a part of component of debt, the requirement of section 36(2)(i) are fulfilled, where a part thereof is taken into account in computing the income of the assessee. Therefore, it was held that assessee is entitled to d .....

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,77,523/-. However, in the ground of appeal there is a typing error and the amount has wrongly been written as ₹ 2,23,07,523/-. This amount was debited under the head bad debts as trading loss being unrecoverable from the clients. In response to query raised by the AO it was submitted that such loss accrued to the assessee as a result of errors caused by time pressure which resulted in wrong punching of client s identity code / wrong execution of trade. It was submitted that the loss was i .....

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, therefore, losses have been incurred which implied that the assessee was working for a opportune moment, where transaction would result into a profit. The loss was only as a result of business of the assessee of purchase and sale of shares. Applying explanation to section 73 of the Act Ld. AO has held such transaction as speculation transaction and in this manner a sum of ₹ 2,32,77,523/- was disallowed. While allowing the relief Ld. CIT(A) has taken into consideration the fact that the a .....

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action has been entered . Keeping in view all these facts Ld. CIT(A) has held that explanation to section 73 would not be applicable in view of the decision of ITAT in the case of M/s. Parker Securities Ltd. vs. DCIT, 102 TTJ 235. Ld. CIT(A) has reproduced the relevant portion from the said decision and has granted impugned relief to the assessee. The Revenue is aggrieved, hence, has filed aforementioned ground. 8.1 Ld. DR relied upon the order passed by AO, as against that Ld. AR has relied upo .....

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ties Ltd. (supra), similar ground was raised by the Revenue. The ground raised in that case read as under: 1.On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the loss of ₹ 2,36,36,821/- as business loss even when the same is specifically covered under section 73 of the Act. 2. The appellant craves to leave to add, to amend and/or alter any of the grounds of appeal, if need be 9.1 The assessee placed reliance upon following decisions: 1. ITO vs. .....

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carefully been considered. Right from the assessment proceedings it was the case of the assessee that the impugned loss has occurred to the assessee in respect of error trade. Due to dispute with the clients, for the transaction, it does not change the relation of principal and the agent. The assessee for business consideration chooses not to recover the losses. These losses are in the course of business and should be allowed as such under section 28 of the Act. All these contentions of the ass .....

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nt disowning transaction is business loss and not speculative loss. Therefore, we are of the opinion that Ld. CIT(A) did not commit any error in accepting the claim of the assessee. Accordingly, we decline to interfere and Departmental appeal on this ground is dismissed. 5.1 Before parting of the Departmental appeal it may be mentioned that amount stated by the Department in its grounds of appeal is wrongly mentioned as ₹ 2,36,36,821/-, whereas the same is ₹ 2,65,07,464/-. In view of .....

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