Amount Paid to obtain Membership of Delhi Stock Exchange can’t be treated as Doubtful Advance since no Steps was taken to Recover: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has disallowed the claim for doubtful advance in respect of the amount paid by the assessee to obtain the membership of the Delhi Stock Exchange by holding that the assessee had not take any steps to recover the amount.

Assessee paid Rs. 20 lakhs as advance amount to obtain the membership of the Delhi Stock Exchange. however, the assessee’s request for membership was rejected and the amount was not refunded. While filing the tax returns for the relevant year, the assessee disclosed the said amount as ‘doubtful advances written off’. However, the Assessing Officer rejected the claim and added the same back to the total income to determine tax liability.

Before the Tribunal, the assessee contended that membership of OTC (Delhi Stock Exchange) enables assessee to use its facilities and do not result in creation of asset of enduring nature so as to held expenditure as capital in nature. It was submitted that these are merely an entry fees and is required to be paid annually and the assessee is eligible for deduction.

While dismissing the plea of the assessee, the Tribunal held that “Assessee before us has not established by way of documentary evidences regarding its dealing in commodities exchange/shares etc., for which it could have benefited from membership of Delhi stock exchange. Further reason for rejection of its membership by Delhi stock exchange is also not known. It is further observed that assessee has not taken any steps to recover the money from Delhi stock exchange and therefore under such circumstances we do not see necessary fulfilment of section 36(1)(vii) of the Act, in any manner whatsoever.”