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2012 (2) TMI 124 - HC - Income TaxDis-allowance of bad debts share broker - Revenue did not doubted share transaction and that amount has been written off in the books of account of the assessee - objection regarding whether the transaction resulting in bad debt were undertaken in the individual capacity of B. Ahuja(client) or on behalf of the company employing him - dis-allowance of interest paid on delayed payment to NSE, DSE revenue contending it to be penalty Tribunal deleted aforesaid dis-allowances - Held that - Deduction is allowed u/s 36(1)(vii) in view of decision in case of T.R.F. Ltd. Vs. CIT (2010 - TMI - 76626 - Supreme Court ) holding that after 1st April, 1989, it is enough if the bad debt is written off in the books of accounts of the assessee and it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. Revenue has not been able to controvert findings of Tribunal and show that the payment was, in fact, in nature of penalty and not normal interest on delayed payment. Deletion of dis-allowance is upheld Decided in favor of assessee.
Issues Involved:
1. Disallowance of bad debt of Rs.1,62,96,953/-. 2. Disallowance of Rs.1,99,856/- paid to the National Stock Exchange and Delhi Stock Exchange. Detailed Analysis: First Issue: Disallowance of Bad Debt of Rs.1,62,96,953/- The Revenue contended that the assessee failed to provide relevant contract notes and evidence of the bad debt incurred. The Assessing Officer (AO) noted that the respondent-assessee debited Rs.1,62,96,953/- as "bad debt written off" but failed to substantiate this claim with documentary evidence. The AO questioned whether the transactions were conducted by Berijender Ahuja in his individual capacity or on behalf of his employer, First Capital (India) Ltd. The AO issued summons under Section 131 to both Ahuja and his employer, who confirmed that the transactions were conducted on behalf of the company, not Ahuja individually. The AO recorded the statement of Rohit Prasad, a director of the respondent-assessee, who admitted that Ahuja conducted transactions both for his employer and himself but failed to provide documentary evidence for transactions in Ahuja's personal capacity. The tribunal found that the AO did not dispute the occurrence of the transactions but questioned their attribution to Ahuja individually. The tribunal noted a dispute between the respondent-assessee and Ahuja, who denied liability, leading to the write-off of the amount in the books of accounts. The tribunal referred to the judgment in CIT v. Bonanza Portfolio Pvt. Ltd., which allows deduction of bad debts written off if the brokerage income from the transactions was declared. The tribunal concluded that the deduction was allowable under Section 36(1)(vii) as the conditions stipulated in Section 36(2) were satisfied, and the bad debt was written off in the books of accounts. The Supreme Court's decision in T.R.F. Ltd. Vs. CIT was cited, establishing that post-1st April 1989, it is sufficient for the assessee to write off the bad debt in the books of accounts without proving its irrecoverability. Second Issue: Disallowance of Rs.1,99,856/- Paid to NSE and DSE The AO disallowed Rs.1,99,856/- paid to NSE and DSE, considering it a penalty and, thus, not an allowable expenditure. The CIT (Appeals) upheld this disallowance without detailed reasoning. However, the tribunal referred to the details provided by the assessee, indicating that the payments were for late deposits of margin money and other violations related to timely delivery. The tribunal relied on the decision in the case of Master Capital, where similar payments were deemed deductible as business expenses, as they were incurred during the course of business and did not constitute an infraction of law. The tribunal concluded that the disallowance was not justified and allowed the deduction. The Revenue failed to demonstrate how the tribunal's findings were incorrect or that the payments were penalties rather than normal interest on delayed payments. Conclusion: The appeal was dismissed as no substantial question of law arose, and the tribunal's findings were upheld.
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