Icici Securities Primary Dealership ... vs Assessee

ौी डȣ.मनमोहन, उपाÚय¢, एवं ौी एन.के. ǒबãलैया लेखा सदःय, के सम¢ Before Shri D Manmohan, Vice President & Shri N K Billaiya, AM

आयकर अपील सं./ ITA No.7285/Mum/2011 िनधा[रण वष[ / Assessment Year 2008-09

ICICI Securities Primary The Addl. CIT Range 3(2), Dealership Ltd. Mumbai. (Formerly known as ICICI Vs. Securities Ltd.), ICICI Centre, H K Parekh Marg, Churchgate - 400 020 PAN AAACI0995H (अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)

Appellants By : Shri Ronak G Doshi Respondent By : Shri Akhilendra Yadav

सुनवाई कȧ तारȣख / घोषणा कȧ तारȣख / Date of Hearing :13.01.2015. Date of Pronouncement : 16.01.2015

आदे श / O R D E R

Per N K Billaiya, AM:

This is an appeal by the assessee preferred against the order of the CIT(A)-7, Mumbai, dated 18.07.2011 pertaining to A.Y. 2008-09. The sole grievance of the assessee is that the CIT(A) erred in confirming the disallowance of provision of Rs.2.34 crores made on account of procurement expenses payable to ICICI Bank.

2. The assessee company is engaged in the business of broker-dealer registration with the Securities and Exchange Commission and member of National Association of Securities. While scrutinizing the return of income for the year under 2 ITA No.7285/Mum/2011 AY 2008-09

consideration the AO noticed that the assessee has debited in the profit and loss account Rs.20.15 crores on account of procurement expenses. The assessee was asked to provide details of the same. After going through the details the AO observed that the assessee has debited procurement expenses of Rs.10.33 corers, which included provisions of Rs.2.33 crores. The assessee was asked to justify the basis of provision and he allowability thereof. It was submitted on behalf the assessee that the provision in question was reversed in A.Y. 2010-11. The AO was not convinced. According to him the provision for the year under consideration was nothing but a contingent liability and cannot be allowed as expenditure. The AO disallowed the provision of Rs.233 crores. Aggrieved, the assessee carried the matter before the CIT(A) and reiterated its claim. The CIT(A) observed that the assessee was eligible to make the payment to the ICICI Bank @ Rs.30 lacs per issue for making use of the retail network and infrastructure of ICICI Bank as per agreement dated 19th July 2004 entered into between the assessee and ICICI Bank. The CIT(A) further observed that there is no other agreement other than this for the said payment. Referring to the emails and other correspondence relied upon by the assessee, the CITA) observed that there was no reason for such correspondence when the business itself was discontinued. The CIT(A) also observed that the provision made by the assessee was not at all actually paid but the same was added back to the income of the assessee in A.Y. 2010-11. The CIT(A) was convinced that the AO was completely justified in his action while making the said disallowance. Aggrieved by this finding of the CIT(A) the assessee is in appeal before us.

3. The counsel for the assessee once again reiterated the claim of procurement expenses qua provision to substantiate its claim, he further drew our attention to the email correspondences exhibited at pages 7, 8 and 9 of the paper-book. It is the say of the counsel that these emails clearly show that there was an agreement for the increase of current rate of Rs.30 lacs per IPO to Rs. 50 lacs for IPOs handled during this financial year. The counsel concluded by saying that the claim of the provision is of an ascertained liability and, therefore, allowable. The counsel relied upon the decision of the Tribunal, Delhi Bench in the case of Yum! Restaurants 3 ITA No.7285/Mum/2011 AY 2008-09

(India) (P.) Ltd. 33 Taxman.com 644. The DR strongly supported the order of the first appellate authority.

4. Having heard the rival submissions, we have carefully perused the orders of the authorities below and the relevant documentary evidence brought to our notice. It is an undisputed fact that the assessee has created provision of Rs.2.33 crores in respect of procurement expenses. It is also an undisputed fact that the claim of the hike from Rs.30 lacs to Rs.50 lacs is only supported by internal email correspondence. There is not tacit agreement to support the claim. Interestingly, the business was discontinued in August 2007, we fail to understand as to why the assessee was persuading the matter in subsequent years for the hike in the procurement charges. It is clear that the assessee has made provision for liability, which was not warranted at all for the year under consideration. The decision relied upon by the assessee is totally misplaced inasmuch as in that case the liability was crystallized during the current assessment year. However, in the present case there is no question of crystallization of liability as the entire liability was unwarranted and uncalled for. We, therefore decline to interfere with the findings of the CIT(A).

5. In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court on this 16th day of January, 2015.

Sd/- Sd/- (D Manmohan) (N K Billaiya) उपाÚय¢ /Vice President लेखा सदःय/ सदःय ACCOUNTANT MEMBER मुंबई Mumbai; Ǒदनांक Dated :16th January, 2015.

SA 4 ITA No.7285/Mum/2011 AY 2008-09

आदे श कȧ ूितिलǒप अमेǒषत/Copy षत of the Order forwarded to :

1. अपीलाथȸ /The Appellant. 2. ू×यथȸ / The Respondent. 3. आयकर आयुƠ(अपील) / The CIT(A), Mumbai. 4. आयकर आयुƠ / CIT

5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, 'J' Bench, ITAT, Mumbai

आदे शानुसार/ BY ORDER,

स×याǒपत ूित //True Copy//

प/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai