ITAT MUMBAI BENCH ‘F’
HSBC Securities & Capital Markets (India) (P.) Ltd.
versus
Assistant Commissioner of Income-tax, Circle-4(1)
IT Appeal NOS. 6762 & 7135 (MUM.) OF 2005
C.O. No. 186 (mum.) of 2006
[ASSESSMENT YEAR 2002-03]
OCTOBER 31, 2012
ORDER
B. Ramakotaiah, Accountant Member
These are cross appeals for the assessment year 2002-03 against the orders of the CIT (A)-IV, Mumbai dated 5.10.2005 and the cross objection on one of the issue by assessee.
2. We have heard the learned Counsel and the learned DR in detail and the learned Counsel also placed on record paper book and a chart indicating the grounds and the decisions relied upon by assessee including the Coordinate Bench orders in assessee’s own case.
ITA No. 6762/Mum/2005
3. In this appeal assessee has raised six grounds.
4. Ground No. 1 pertains to the dis allowance under section 14A. Assessee has shown dividend income of Rs. 3,53,85,721/- which was claimed as exempt under section 10(33). AO estimated 5% of the dividend income as expenditure attributable to earning such tax free dividend income considering both direct and indirect expenses incurred by assessee. Accordingly he arrived at the dis allowance of Rs. 16,69,286/- being 5% of the dividend income. The same was confirmed by the CIT (A) differing from the orders of his predecessor in A Y 2001-02.
5. The learned Counsel submitted that the ITAT in A Y 2004-05 and 2005-06 has determined the reasonable amount at a lump sum amount of about Rs. 2 lakhs and accordingly he has no objection if proportionate amount was disallowed but not at the ratio adopted by AO.
6. The learned DR however, submitted that by the order of the ITAT in 2001-02, amount of 5% has been confirmed.
7. We have examined the issue and the details placed on record. In A Y 2001-02, the dividend income was only Rs. 4,91,884/- and an amount of Rs. 24,594/- was disallowed and was confirmed by the ITAT. However, in the later years based on the fact that amount of dividend was earned from only one company to an extent of Rs. 3.30 crores, coordinate Bench considered that it was reasonable estimate dis allowance at Rs. 2.00 lakhs as assessee has not borrowed any funds, nor there is any finding that any interest is attributable to earning the dividend income. Facts are similar in this year and large amount of Dividend was earned from one company alone. In view of this, respectfully following the decision of the Coordinate Benches in assessment years 2004-05 and 2005-06, the dis allowance is restricted to an amount of Rs. 2.00 lakhs. Ground is partly allowed.
8. Ground Nos.2 & 3 pertain to the claim of bad debts/loss, the claims which have been made without prejudice to one another.
9. AO in the assessment order disallowed the amount stating that a debt unless it has become bad, cannot be allowed under section 36(1)(vii) and no loss can be allowed unless the same has crystallized applying the principles and depending on the decision of the ITAT in the case of Thermite Corporation disallowed entire amount of Rs. 3,36,147/-. The CIT (A) after considering the submissions of assessee, however, allowed an amount of Rs. 71,942/-being the amount written off given as advance to one of the employees which could not be recovered and with reference to the balance amount, he confirmed AO’s action.
10. The facts relating to the bad debts are that assessee had the following amounts written off in the books of account:
