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UTI Securities Ltd (Now Known as Standard Chartered –STIC Capital Markets Ltd.) Versus Addl. CIT, Range 4 (2) , Mumbai

2012 (3) TMI 544 - ITAT MUMBAI

Addition u/s 36 - Held that:- We are of the opinion that the assessee satisfies the conditions stated under section 36(2) and accordingly the Assessing Officer is directed to allow the amounts. Ground No.1.1 is accordingly allowed. - Disallowance under section 40(a)(i) - TDS u/s 195 - Held that:- We are of the opinion that the issue requires detailed examination by the CIT (A). The CIT (A) has not adjudicated whether the amount paid by the assessee was chargeable under the provisions of the .....

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ore the issue in Ground No.1.2 to the file of the CIT (A). - Gains arising out of sale of shares/units are treated as business income instead of short term capital gain - Held that:- We were informed that in earlier years when assessee suffered Capital Loss the AO treated them as business loss and Speculation loss. As seen from the paper book placed, the assessee had made specific request to the Assessing Officer to set off speculation losses determined in earlier year’s consequent to chang .....

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pellant :. Nitesh Joshi For the Respondent : Dipak Ripote, DR ORDER B. Ramakotaiah (Accountant Member) This is an appeal by the assessee against the orders of the CIT (A)-8 Mumbai dated 20.01.2012. The assessee has raised the following grounds: 1. On the facts and circumstances of the case and in law, the Commissioner of Income Tax Appeals VIII Mumbai has confirmed the additions made by the Addl. Commissioner of Income Tax, Range 4(2), Mumbai (hereinafter referred to as the A.O) on the following .....

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ransactions whereof were entered through recognized stock exchange as business income instead of short term capital gain and thereby levying tax at the rate of 30% instead of concessional rate of 10% as eligible under section 111A of the Income Tax Act, 1961 . 2. In the course of the proceedings the assessee has also raised an additional ground which is as under: On the facts and circumstances of the case and in law the Appellant shall be allowed to adjust the deemed speculation loss determined .....

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. The details were extracted by the Assessing Officer in Para 4.2 of the assessment order. On inquiry from the Assessing Officer the assessee also explained the nature of the bad debts written off under section 36(1)(vii) r.w.s. 36(2). The Assessing Officer however, was of the view that the amounts cannot be allowed as bad debts on the reason that the assessee was offering only the brokerage income and debts with reference to the amounts not recoverable from the clients does not satisfy the cond .....

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ervice charges recoverable being depository/WDM receipts offered as income in the earlier years. He referred to page No.3 in the paper book about the details filed before the Assessing Officer explaining that these two charges were included as income in the previous years. Therefore, they satisfy the conditions of section 36(2). It was further submitted with reference to the balance amounts, the assessee has taken necessary steps to recover and when the management felt that there is no possibili .....

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however, submitted that the assessee has not justified whether the debts became bad or not and referred to the statements filed to submit that the details of various bad debts were not furnished before the Assessing Officer and therefore, the Assessing Officer was justified in disallowing the amount. 7. We have considered the issue. Under section 36(1)(vii), the amount of any bad debt or part thereof which was written off as irrecoverable in the accounts of the assessee has to be allowed as dedu .....

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ecame bad does not survive as the law has been amended to allow the bad debts once it is held as irrecoverable and written off. As far as the amounts written off of depository receipts of Rs..5,26,505/- and WDM of Rs..1,73,119/- these are stated to be the charges recoverable which are offered as income in the earlier years. Even though the assessee has submitted the same, AO has not considered this aspect. Amounts to the above extent certainly satisfies the conditions under section 36(2) as inco .....

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okerage income and accrual of debt against the clients in respect of share purchase are two different events which happen at two different times, the amount receivable by the assessee on account of brokerage is a part of debt receivable by the share brokers against its clients against the purchase of shares and once such brokerage is credited to the Profit & Loss A/c of the broker and the same is taken into account in computing his income, the condition stipulated in section 36(2)(i) gets sa .....

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Ground No.1.1 is accordingly allowed. 8. Ground No.1.2 is with reference to disallowance under section 40(a)(i) of the Income Tax Act. Briefly stated the assessee made payment of Rs..31,77,416/- as professional fees paid to foreign party Aurbach Grayson & Co (AGC) resident of New York, USA. On the basis of certificate issued by the CA that the amounts wre covered under article 7 of the DTAA between India and USA, the assessee had not deducted Tax while remitting the amount. The Assessing Off .....

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ere made as per the terms and conditions and they were paid for the services rendered overseas which were not utilized in India. It was further submitted that the said concern does not have any PE in India. Therefore, no part of income payable to them is liable to tax in India. Hence no TDS was made while effecting the payments to them. The assessee relied upon the decision of the ITAT, in the case of Venkat Shoes Pvt Ltd, Madras (citation not mentioned in order).The CIT (A) however, without exa .....

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t as has been held in case of Samsung Electronics 320 ITR 209 by the Karnataka High Court that it is not open to payer to argue that the payment does not result in taxable income in the hands of the non-resident recipient, referring to Supreme Court judgment in case of Transmission Corporation of India 239 ITR 587 that the moment there is a payment to a non-resident, there is an obligation on the payer to deduct tax under section 195(1) . 10. Before us the learned Counsel submitted that the CIT .....

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ction 195(1) shows that the remittance has got to be of trading receipts, the whole or part of it is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted. It was submitted that the assessee is covered by the provisions of the DTAA as there was no PE in India. On the basis of the CA certificate, the amount was remitted without any TDS. However, it was fairly submitted that arguments of the assessee are not examined by the CIT (A) as he followed .....

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CIT (A). The CIT (A) has not adjudicated whether the amount paid by the assessee was chargeable under the provisions of the act so as to attract the provisions of section 195 and consequently 40(a)(i). The contentions of the assessee with reference to the nature of the payment, applicability of various provisions of the Act and the DTAA between India and USA require detailed consideration. Since these aspects were not examined, we are of the opinion that the issue is to be restored to the file .....

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ad suffered losses on the same account and the Assessing Officer treated as speculation loss by virtue of invoking the provisions of section 73 explanation (2) and therefore, the assessee has raised the additional ground that in case the amounts are treated as speculation business, the same is required to be set of to the losses determined by the Assessing Officer in the earlier years. He referred to the submissions before the Assessing Officer vide letter dated 25/02/2008, more so Item No.24 to .....

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is claim of the assessee and simply treated short term capital gain as business income without adjusting the loss determined by the Assessing Officer in the earlier years. It was submitted that if this additional ground is allowed, the assessee would not prefer Ground No.2. The learned Departmental Representative, however, submitted that as per the provisions of the Act, the earlier year s determination as speculation loss has no bearing on the issue and further submitted that the orders in earl .....

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High Court in the case of Lokmat Holdings 322 ITR 43 has considered the scope of section 73 Explanation (2) and therefore, in view of the jurisdictional High Court judgment the assessee s contention made before the Assessing Officer during the assessment should be allowed and if that is considered, there is no case for adjudicating the Ground No.2 as such. 15. We have considered the issue. The main dispute is with reference to treatment given to share transactions. Assessee treated them as inves .....

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