The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that losses of clients cannot be shifted by ABML to the assessee merely because those clients had been sourced or referred by the assessee, Claim under the Options Maxima Scheme is not allowable.
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/-. The assessee company, M/s. Aditya Birla Money Mart Limited was acting as an authorised person and 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.,
It was submitted that the clients would not have conducted further transactions with their Relationship Manager which would in turn affect the business of the assessee company and the assessee was compelled to bear the losses of the clients in order to maintain its goodwill and reputation with the clients.
CIT(A) on placing reliance on the business partner agreement dated 23/08/2010 entered into between ABML and assessee observed that the assessee would be contractually liable for absorbing the losses incurred by the clients under „Options Maxima Scheme‟ and therefore the said loss would become an allowable deduction in the hands of the assessee company as a measure of commercial expediency.
A Coram of Shri Vikas Awasthy, JM& Shri M Balaganesh, AM observed that ABML is only the main broker who had developed the Options Maxima Scheme and offered it to its clients pursuant to the Risk Disclosure Document signed by the clients in favour of ABML. Merely because those clients had been sourced or referred by the assessee to ABML, the losses of those clients cannot be shifted by ABML to the assessee.
The Tribunal held that the loss of clients incurred under the Options Maxima Scheme claimed by the assessee in its return is not allowable and reversed the findings of the CIT(A).
Shri Yogesh Thar & Ms Ikshu Shah appeared for the assessee and Ms Shailaja Rai appeared for the revenue.
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