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2019 (6) TMI 1472 - AT - Income TaxPayment towards cost in respect of plot sold - expenditure incurred by the assessee towards the transfer fees, and the development charges paid to the society in connection with the property held by the assessee - AO not allowing the expenditure incurred in connection with the cost of the plot - HELD THAT - None of the authorities below, has pointed out any defect in the receipt as discussed above. In case of any doubt on the genuineness of the above receipt/the expenditure incurred by the assessee, the authorities below should have taken the confirmation from the society. But the Revenue has not exercised its power granted under the statute. The assessee incurred all the payments above/expenditures through banking channel. Therefore we hold that the authorities below have made the disallowance of the claim of the assessee without bringing any cogent reason. Therefore, we reverse the order of the authorities below and direct the AO delete the addition made by him. Addition on account of the bad debts/loss incurred incidental to the business - AO disagreed with the claim of the assessee by observing that the assessee did not show the amount of bad debts as income in any of the previous years - HELD THAT - Bad debts claimed by the assessee on account of the amount recovered by the angel group from the assessee. Indeed, the amount recovered by the angel group from the assessee was not offered by him as income in his books of accounts. Therefore the condition as specified under section 36(2) of the Act has not been satisfied. Therefore, the amount of deduction as bad debts cannot be claimed. We note that the courts have allowed such claim of the assessee as bad debts as the same was incurred in the course of the business carried on by him. Therefore in our considered view, such loss is a business loss and the same is eligible for deduction as bad debts. As relying on BONANZA PORTFOLIO LTD. 2009 (8) TMI 636 - DELHI HIGH COURT we hold that the loss incurred by the assessee in the course of the business is revenue in nature and the same is eligible for deduction as bad debts. Hence the ground of appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of expenditure incurred in connection with the cost of the plot. 2. Disallowance of claim of deduction as bad debt or loss incidental to business. 3. Disallowance of electricity expenses. 4. General ground for allowing the appeal in toto. Issue-wise Detailed Analysis: 1. Disallowance of Expenditure Incurred in Connection with the Cost of the Plot: The assessee, engaged in trading commodities and shares, sold a property for ?3,40,50,000 and claimed a cost of acquisition of ?84,31,880, including ?20,74,880 towards transfer fees and development expenses. The AO disallowed the ?20,74,880 expenditure due to lack of documentary evidence, which the assessee contested by providing details of payments made by cheque and a letter from the society. The CIT (A) upheld the AO's decision, stating the assessee failed to prove the additional cost by supporting evidence and that the expenses were capital in nature. The Tribunal found that the authorities did not point out any defects in the receipts provided by the assessee and noted that the payments were made through banking channels. The Tribunal reversed the disallowance, directing the AO to delete the addition, thus allowing the assessee's appeal on this ground. 2. Disallowance of Claim of Deduction as Bad Debt or Loss Incidental to Business: The assessee, a franchisee of the Angel group, claimed a deduction of ?54,87,027 as bad debts, which were amounts recovered by the Angel group from the assessee due to clients' defaults. The AO disallowed the claim, stating the assessee did not show these amounts as income in previous years, thus not satisfying section 36(2) of the Act. The CIT (A) confirmed the AO's decision, noting that the amounts were not part of the assessee's income. The Tribunal, however, found that such losses incurred in the course of business are eligible for deduction as bad debts, citing judgments from the Delhi High Court and Bombay High Court. The Tribunal allowed the assessee's appeal on this ground, recognizing the loss as revenue in nature and eligible for deduction. 3. Disallowance of Electricity Expenses: The assessee claimed a deduction of ?46,456 for electricity expenses, which the AO disallowed. The CIT (A) confirmed this disallowance. During the Tribunal proceedings, the assessee's representative did not press this ground of appeal due to the small amount involved. Consequently, the Tribunal dismissed this ground as not pressed. 4. General Ground for Allowing the Appeal in Toto: This ground was a general plea for allowing all claims and deductions made by the assessee. Since the Tribunal provided specific rulings on each contested issue, this general ground was addressed through the detailed decisions on the individual issues. Conclusion: The Tribunal partly allowed the appeal, reversing the disallowance of the expenditure incurred in connection with the plot and the bad debt claim, while dismissing the appeal concerning the electricity expenses as not pressed. The order was pronounced on 24/06/2019 at Ahmedabad.
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