TMI Blog2015 (6) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on the transaction. 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 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 deduction by way of bad debt under section 36(1)(viii) r.w.s. 36(2) in respect of amount which could not be recovered from its clients 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 - CIT(A) allowed claim - Held that:- Right from the assessment proceedings it was the case of the assessee that the impugned loss has occurred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.03. The Learned CIT (A) failed to appreciate that the actual cost of original membership card, is to be assigned to the new membership 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 ₹ 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 ₹ 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 ₹ 26,62,000/-, and treating the same as a cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 rights comes into existence whenever the assessee make payment for non-compete fee and after obtaining noncompete right, the assessee can develop and run his business without bothering about competition and, therefore, non-compete right is intangible asset eligible for depreciation. In the case of Orchid Chemicals and Pharmaceuticals Ltd., 131 ITD 385, which relied was upon by Ld. AR for the purpose of amortization, it has been held that since the 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 opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties, we found no infirmity in the relief granted by Ld. CIT(A), therefore, Ground No.1 of the Revenue s appeal is dismissed. 8. Apropos Ground No.2, it may be mentioned here that the relief allowed by Ld. CIT(A) is a sum of ₹ 2,32,77,523/-. 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 incurred in the course of carrying on business and should be allowed as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. GDV Share Stock Broking Services Ltd., 88 TTJ (Cal) 352 2. M/s.Parker Securities Ltd. vs. DCIT, 102 TTJ (Ahd) 235. 3.33 CCH 124 (Mum-Trib) HSBC Securities Capital Markets India P. Ltd., vs. ACIT 4.139 R 149 (AP), CIT vs. Shah Pratapchand Nowpaji 5. 91TTJ 57 (Del-Trib) ACIT vs. Subhash Chandra Shorewala. 6.50 SOT 592 (Ahd-Trib) ITO vs. Rajiv Securities P. Ltd. After considering these decisions the Tribunal has held as under: 5. We have heard both the parties and their contentions have 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 assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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