2017 (4) TMI 400 - AT - Income Tax

Additions on a/c. of bad debt - Held that - Issue under consideration is covered by the decision of Hon ble Bombay High Court in the case of CIT v Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) and CIT v. Bonanza Portfolio (2009 (8) TMI 636 - DELHI HIGH COURT). SLP dismissed by Supreme Court in case of CIT v. Bonanza Portfolio (2010 (7) TMI 1068 - SUPREME COURT). Thus we do not find any infirmity in the order of CIT(A) for deleting the disallowance on account of the bad debts. Mark to market loss - Addition of net loss on account of Vanda transaction - assessee debited the same to the P&L A/c and claimed as part of net arbitrage income which is considered as business income - Held that - e order of the lower authorities we found that CIT(A) has relied upon his order for A.Y.2009-10 to A.Y.2010-11. The issue is covered in favour of assessee vide orders of the Hon ble Tribunal in assessee s own case for A.Y.2009-10 and 2010-11 as well as the decision of the Hon ble Supreme Court in the case of CIT v. Woodward Governor 2009 (4) TMI 4 - SUPREME COURT .We do not find any reason to interfere in the order of CIT(A) for deleting the loss claimed under the head Mark to Market Loss . Claim of depreciation on Customer Rights - Held that - No reason to interfere in the order of CIT(A) for allowing claim of depreciation on customer s right as held that the purchase of clientele business was a right which could be used as a tool to carry on business and therefore eligible for depreciation on the payments made, since it falls within the expression any other business or commercial rights of similar matter used in section 32(1)(ii) of the Income Tax Act, 1961. Disallowance u/s.14A - Held that - We have considered rival contentions and found that the own funds of assessee (Rs. 555.45 crores) are sufficient to cover up the value of investment (Rs. 41.07 crores) so no interest disallowing is required to be made u/ s 14A of the Act. With regard to administrative expenses, the issue is covered vide order of the Hon ble Tribunal in assessee s own case A.Y.s 2008-09 to 2010-11.The matter has been sent back to the file of Assessing Officer for deciding the issue in accordance with the direction given by the Hon ble Tribunal in case of sister concern of the assessee wherein a similar working given by the assessee has been accepted by the Assessing Officer for A.Y.2009-10 to 2011-12. After going through the order of the Tribunal as well as consequential orders passed by the AO, in the case of sister concern for the A.Y.2009-10 to 2011-12, we do not find any justification for disallowance so made by the AO and confirmed by CIT(A). Accordingly AO is directed to delete the disallowance made in excess of ₹ 11.84 lakhs. Disallowance of indexed cost of acquisition on sale of shares of BSE Ltd. need to be deleted as relying on assessee s own case for A.Y.s 2008-09 to 2010-11 2016 (3) TMI 962 - ITAT MUMBAI .

Issues Involved:
1. Disallowance under Section 14A
2. Disallowance of indexed cost of acquisition on sale of shares of BSE Ltd.
3. Deletion of additions on account of bad debts
4. Depreciation on VSAT
5. Deletion of addition on account of Vanda loss
6. Deletion of addition on account of Mark to Market (MTM) loss
7. Depreciation on Customer Rights

Detailed Analysis:

1. Disallowance under Section 14A:
The assessee contested the enhancement of disallowance under Section 14A by the CIT(A), arguing that the AO failed to provide cogent reasons for not accepting the disallowance already made by the appellant. The Tribunal found that the assessee's own funds were sufficient to cover the value of investments, thus no interest disallowance was required under Section 14A. The issue of administrative expenses was sent back to the AO for reconsideration based on the Tribunal's directions in a sister concern's case. The AO was directed to delete the disallowance exceeding ?11.84 lakhs.

2. Disallowance of Indexed Cost of Acquisition on Sale of Shares of BSE Ltd.:
The assessee argued that the indexation benefit should be allowed from the date of acquisition of BSE Cards, not the date of conversion into shares. The Tribunal found the issue in favor of the assessee, following its own previous orders for earlier assessment years, and directed the deletion of the disallowance.

3. Deletion of Additions on Account of Bad Debts:
The CIT(A) allowed the assessee's claim for bad debts, referencing the ITAT Special Bench decision in the case of Shreyas Morakhia, which held that amounts receivable by a share broker from clients constitute trading debt. The Tribunal upheld the CIT(A)'s decision, citing the Bombay High Court's ruling in Shreyas S. Morakhia and other relevant case laws.

4. Depreciation on VSAT:
The AO had allowed depreciation on VSAT at 25%, treating it as a wireless communication device. The CIT(A), following earlier years' orders, allowed depreciation at 60%. The Tribunal upheld the CIT(A)'s decision, referencing its own previous rulings in the assessee's case.

5. Deletion of Addition on Account of Vanda Loss:
The CIT(A) allowed the Vanda loss as a business loss, following earlier years' orders. The Tribunal agreed, noting that the issue was covered by previous Tribunal decisions in the assessee's favor.

6. Deletion of Addition on Account of Mark to Market (MTM) Loss:
The CIT(A) treated the MTM loss as a business loss under Section 28, referencing the Supreme Court's decision in Woodward Governor. The Tribunal upheld this view, noting that the issue was covered by previous Tribunal and Supreme Court rulings.

7. Depreciation on Customer Rights:
The CIT(A) allowed depreciation on customer rights, referencing the ITAT decision in India Capital Markets (P) Ltd. The Tribunal upheld this decision, following its own previous orders in the assessee's case.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal in part, directing the AO to delete certain disallowances and uphold the CIT(A)'s decisions on various issues. The order was pronounced in the open court on 31/03/2017.

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