TMI Blog2010 (10) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of penalty vide order dated 22.12.2006 passed under section 143(3) of the I.T. Act, 1961 (the Act). On appeal the learned CIT(A), while allowing substantial relief to the assessee, partly allowed the appeal. 3. Being aggrieved by the order of the CIT(A) the assessee and the Revenue, both are in appeal before us. ITA No. 3554/Mum/2007 (Assessee s appeal) 4. The grounds taken by the assessee read as under: - 1. The Ld. C.I.T. (Appeals) erred in confirming the action of A.C.I.T. of allocating estimated ₹ 2,00,000/- out of the total expenses incurred for earning exempt income. 2. The Ld. C.I.T. (Appeals) erred in confirming the addition to the share business loss by allocating certain expenses to the extent of ₹ 9,02,924/-. 5. At the time of hearing the learned counsel for the assessee submits that he may be allowed to withdraw the above grounds raised by the assessee which was not objected to by the learned D.R. 6. That being so and in the absence of any supporting material placed on record by the learned counsel for the assessee, both the grounds raised by the assessee are dismissed being not pressed. ITA No. 4282/Mum/2007 (Revenue s a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Revenue are, therefore, partly allowed for statistical purposes. 11. Ground Nos. 3 4 are against deletion of disallowance of bad debts of ₹ 3,78,634/-. 12. The brief facts of the above issue are that during the course of assessment proceedings it was observed by the A.O. that the bad debts of ₹ 3,78,634/- were in respect of client called Yogesh C. Shah. The assessee submitted that in spite of sincere efforts made by it, the company was unable to recover the dues. Therefore, the same have been written off as bad debts. As the conditions specified under section 36(1)(vii) are fulfilled, the deduction on account of bad debts written off is allowable to the assessee. Alternatively the same may be allowed as loss incidental to business. However, the A.O. was of the view that the assessee could not prove that the bad debt become really bad so as to be irrecoverable within the provisions of section 36(1)(vii) of the Act. He also held that merely writing off of an amount in the books of account did not make the same as eligible for deduction. He also held that the amount written off also the principal amount of purchase of consideration which was otherwise not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that the issue now stands covered against the Revenue and in favour of the assessee by the decision of the Special Bench of the Tribunal in Shreyas S. Morakhia (supra) wherein it has been held at placitum 33 as under: - 33. Keeping in view all the facts of the case and the legal position emanating from the various judicial pronouncements as discussed above, we are of the view that the amount receivable by the assessee, who is a share broker, from his clients against the transactions of purchase of shares on their behalf constitutes debt which is a trading debt. The brokerage/commission arising from such transaction very much forms part of the said debt and when the amount of such brokerage/commission has been taken into account in computation of income of the assessee of the relevant previous year or any earlier year, it satisfies the condition stipulated in section 36(2)(i) and the assessee is entitled to deduction u/s 36(1)(vii) by way of bad debts after having written off the said debts from his books of account as irrecoverable. We, therefore, answer the question referred to this Special Bench in the affirmative that is in favour of the assessee. In the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s action in spreading over the expenses for acquiring corporate membership for a period of 10 years cannot be the basis to hold that the expenses is of a capital nature. Even a revenue expenditure, at the option of the assessee, can be spread over for a period of time for which the assessee is likely to have benefit by incurring such revenue expenditure. This is recognized by Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Vs. CIT, 225 ITR 802 (SC). As far as expenditure in acquiring corporate membership and expenses incurred in using club facilities are concerned, we are of the view that the same are business expenditure as has been held in the following cases: - American Express International Banking Corporation Vs. CIT, 258 ITR 601 (Bom) CIT V. Sundaram Industries Ltd., 240 ITR 335 (Mad) CIT Vs. Samtel Colour Ltd., 180 Taxman 82 (Del) Mr. Vimal B. Shah Vs. ITO, ITA No. 1182/Mum/2006 (Mum) ACIT Vs. Mr. Ramesh Damani, ITA No. 5143/Mum/2006 (Mum) In the absence of distinguishing features brought on record by the Revenue, we respectfully following the order of the Tribunal (supra) decline to interfere with the order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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