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Issues involved: Revenue appeal against CIT (A) order allowing business expenses, treatment of income from bad debts and miscellaneous income, addition on account of gratuity write back.
Business Expenses: The Revenue challenged the allowance of business expenses amounting to Rs. 28,33,628/- despite the absence of any business activity due to SEBI's debarment order. The AO contended that since the assessee was prohibited from conducting business, the claimed expenditure should not be allowed. Income Treatment: The Revenue disputed the CIT (A)'s classification of income from bad debts and miscellaneous income as business income instead of "income from other sources." The AO had taxed these amounts under the head "income from other sources" without providing a rationale. Gratuity Write Back: The Revenue objected to the deletion of the addition on account of gratuity write back at Rs. 2,29,929/- as "income from other sources." The CIT (A) allowed this based on the absence of verification regarding the earlier allowance of this expenditure. The assessee, a Member of Stock Exchange, Mumbai, was barred from undertaking new business activities by SEBI. The AO disallowed the claimed business expenditure and taxed other income as "income from other sources." The assessee argued that the business was only suspended, not closed, citing precedents. The CIT (A) upheld the assessee's contentions, allowing the expenditure and treating certain income as business income under section 41(1). The ITAT Mumbai upheld the CIT (A)'s decision, noting that the business was temporarily suspended, not closed, during the assessment year. The Tribunal dismissed the Revenue's appeal, emphasizing that the bad debts and miscellaneous income should be considered as business income, not "income from other sources." The treatment of gratuity write back was also upheld, as it was not allowed as expenditure in earlier years. In conclusion, the ITAT Mumbai dismissed the Revenue's appeal, affirming the CIT (A)'s order.
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