DCIT Vs Aditya Birla Money Mart Limited (ITAT Mumbai)
ITAT Mumbai held that loss of clients incurred under Options Maxima Scheme claimed by the assessee (being an agent) in its return is not allowable.
Facts-
The Revenue challenged the action of the CIT(A) in deleting the disallowance of the assessee’s claim of exceptional losses on account of certain trades of Rs.95,68,91,785/-. Notably, the assessee company was acting as an authorised person and has entered into a business partner agreement with ABML on 23/08/2010 which interalia required the assessee bank to make customers or essential customers aware of the products and the services of ABML from time to time and share details of all such customers who have evinced interest in availing such products and services.
The assessee contended that as part of the business agreement, it had referred to its existing customers as clients for the options maxima scheme offered by ABML. It was contended by the assessee that these clients continued to be serviced by the assessee as per their investment needs and objectivity including advisory on various third-party financial products and services on securities and securities-related instruments etc.,
Conclusion-
The assessee had merely sourced its clients to ABML and it is ABML who had marketed its Options Maxima Scheme product before its clients and the clients of ABML had decided to make investment in the said Options Maxima Scheme. Hence the relationship between assessee and ABML would have to be construed only as Agent-Principal relationship, wherein ABML being Principal and assessee being the agent of ABML.
Hence in no way, the loss incurred by the clients of ABML in Options Maxima Scheme at the behest of ABML’s neglect or for whatever reason, be shifted to the assessee herein, who has got absolutely no locus standi with the said transaction.
Held that the loss of clients incurred under Options Maxima Scheme claimed by the assessee in its return is not allowable.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No.4256/Mum/2016 & CO No.12/Mum/2018 for A.Y.2011-12 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-16, Mumbai in appeal No.CIT(A)-16/IT-136/DCIT 8(1)/2014-15 dated 30/03/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/03/2014 by the ld. Dy. Commissioner of Income Tax-8(1), Mumbai (hereinafter referred to as ld. AO).
Identical issues are involved in both these appeals, hence, they are taken up together and disposed of by this common order.
Let us take up the Revenue appeal first.
2. The first issue raised by the Revenue is challenging the action of the ld. CIT(A) in allowing depreciation on intangible assets.
2.1. We have heard rival submissions and perused the materials available on record. The assessee is engaged in the business of marketing and distribution of financial products such as mutual fund units, fixed deposits, bonds, initial public offers, real estate broking and deriving management fees. The assessee also offers services such as investment, planning and research. The issue in dispute is a recurring issue coming to the assessee from A.Y.1999-2000 onwards. We find that the same is covered in favour of the assessee by the order of this Tribunal in ITA No.5874/Mum/2009 for A.Y.1999-2000 dated 25/09/2018 wherein by placing reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs. Smifs Securities Ltd., reported in 348 ITR 320, this Tribunal had already granted depreciation on the intangible assets to the assessee. Similar depreciation was allowed to the assessee upto A.Y.2010-11. We find that the ld. CIT(A) after narrating the entire facts from para 6.2.1. to 6.2.7 of his order had placed reliance on the orders passed by his predecessor for A.Yrs. 2003-04 to 2010-11 and had granted relief to the assessee. The ld. AR before us placed on record the consolidated Tribunal order passed for A.Yrs. 1999-00 to 2010-11 in the case of the assessee on 25/09/2018 wherein this issue is covered in favour of the assessee. Respectfully following the said Tribunal order, the ground No.1 raised by the Revenue is dismissed.
3. The ground No.2 & 3 raised by the Revenue are challenging the action of the ld. CIT(A) in deleting the disallowance of assessee’s claim of exceptional losses on account of certain trades of Rs.95,68,91,785/-.
3.1. The brief facts of this case are that the assessee company was acting as authorised person and has entered into business partner agreement with ABML on 23/08/2010 which interalia required the assessee bank to make customers or essential customers aware of the products and the services of ABML from time to time and sharing details of all such customers who have evinced interest in availing such products and services. Under the agreement, the assessee company was entitled to a share of 70% of the brokerage revenue earned by ABML from the customers referred by the assessee. For carrying out such business, the assessee company was appointed as authorised person of ABML in terms of SEBI Circular No. MISRD/DR1/CIR-16/09 dated 06/11/2009. Subsequently, and approval from National Stock Exchange of India Ltd., was obtained on 20/08/2010 and later from BSE and MCX-SX. Accordingly, the business partner agreement was entered with ABML by the assessee on 23/08/2010. The assessee contended that as part of the business agreement, it had referred its existing customers as clients for the options maxima scheme offered by ABML. It was contended by the assessee that these clients were continued to be serviced by the assessee as per their investment need and objectivity including advisory on various third party financial products and services on securities and securities related instruments etc.,
3.2. ABML introduced options maxima scheme and offered it to various customers (i.e. its own clients as well as the clients referred by assessee company). In September 2010, the client‟s position in options maxima scheme offered by ABML showed a high amount of mark to market losses for the following principal reasons:-
