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TMI Blog2015 (6) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... mbership card. 1.04. The Learned CIT (A) is in error while stating that it was not possible to allocate the consideration paid by the assessee towards these rights separately. 2. Under the facts and the circumstances of your 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 Rs. 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 Rs. 5,05,000/- as a expenses u/s 37 or business loss u/s 28/29 of the Income Tax Act, 1961 3. Under the facts and the circumstances of your appellant, the Learned CIT (A) has erred in confirming the addition made by Learned A.O. on account of disallowance of the Non compete fees paid Rs. 26,62,000/-, and treating the same as a capital expenditure. 3.01.The Learned CIT (A) failed to appreciate the submission made by your appellant, about the allow ability of the non compete fees pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajaram Muthukumar 200,000 TOTAL 2,662,000 The aforementioned amount was claimed as revenue expenditure on the ground that assessee had been regularly paying sub-brokerage to these parties and details of sub-brokerage paid to these parties in the last three years was also submitted and it was claimed that these expenditure should be allowed as revenue expenditure. The AO did not accept such submission of the assessee and treated such expenditure as capital expenditure. Before Ld. CIT(A) one of the alternative contention was that if the expenditure is treated as capital expenditure then depreciation may be allowed upon 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 assessee is commercial right, therefore, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-compete agreement was for a period of four years, 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. Accordingly, we decline to interfere in such decision of Ld. CIT(A). The Revenue's ground as well as assessee's ground on this issue are dismissed. REVENUES'S APPEAL: 6. Apropos ground No.1, the only grievance of the Revenue in this ground is that Ld. CIT(A) has erred in allowing relief on the basis of decision in the case of Shreyas S. Morakhia Special Bench (Mum) as the same is not accepted by the Department. Now it is the case of Ld. AR that Hon'ble Bombay High Court has upheld the said decision 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business loss. The AO did not accept such explanation of the assessee. According to AO once the client has disowned the transaction, then the assessee steps into the shoes of client and it is in the interest of the assessee that the transaction is squared off at the earliest and the losses, if any, are minimized. The AO observed that assessee did not establish this fact and the transactions were settled beyond reasonable time, 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 Rs. 2,32,77,523/- was disallowed. While allowing the relief Ld. CIT(A) has taken into consideration the fact that the assessee is one of the dominant retail stock broking house in India and is having a net work of 159 own branches and 1000 plus business partners across the country. The cliental of the assessee is over ten lacs retail customers and has a DP cliental of approximately ten lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 assessee have been recorded in the assessment order in para 3.3. The AO has not brought any material on record to suggest that these contentions of the assessee are either false or incorrect. No material has also been brought on record that these losses are on account of assessee's own trading in shares. If it is so, the loss accrued to the assessee will be governed by the aforementioned decisions of Tribunal where consistent view has been 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 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 De ..... X X X X Extracts X X X X X X X X Extracts X X X X
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