9911796707
TMI Blog2010 (2) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... he notes to the accounts it has been stated as under : "Fixed assets of the company include Rs. 10,00,000 invested in the Calcutta Stock Exchange Card. Further investment of the company includes deposits (with interest) with the CSE amounting to Rs.8,29,957. Looking at the situation of the Calcutta Stock Exchange, we are of the opinion that this amount is not recoverable and hence needs to be written off in the books." The Assessing Officer asked the assessee to explain the reason for claiming the above deduction and the provisions under which section this deduction is allowable. The assessee filed a copy of letter written to the administrator of the Calcutta Stock Exchange asking them to pay the assessee interest on interest bearing deposit and to refund the capital adequacy deposit as the assessee has not done any trading business in the floor of the concerned Exchange. It was also submitted that on account of weak financial and listing position of the CSE, the assessee has started recovery process but no amount was received by it from the CSE. The amount was accordingly written off. The Assessing Officer, however, rejected the claim of the assessee on the following reasons : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there was a financial crisis with the CSE, therefore, the assessee was not able to carry on any business activities. The annual audit account of the CSE was produced in support of the contention that financial position of the CSE has deteriorated. It was, therefore, submitted before the learned Commissioner of Income-tax (Appeals) that the Assessing Officer was not justified in disallowing the business loss suffered by the assessee. The learned Commissioner of Income-tax (Appeals) considering the submission of the assessee and material on record confirmed the findings and dismissed the appeal of the assessee. His findings contained in paragraphs 9, 9.1 and 10 read as under: "9. I have considered the above submissions. The appellant has `written off the amount during the accounting year ending on March 31, 2003. To this effect a note has been made in the annual accounts where it is stated that in the opinion of the appellant the amount from the CSE is not recoverable, hence needs to be written off. In course of hearing before the Assessing Officer it is submitted that the Calcutta Stock Exchange was facing financial crisis and it has defaulted on payment relating to a number o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is justified in rejecting the claim of the appellant and disallowing the same. The disallowance made by the Assessing Officer is hereby confirmed." Learned counsel for the assessee reiterated the submissions as were made before the lower authorities and referred to paper book 27 which is letter of the CSE dated May 2, 2006. Paper book 56 note on accounts of the CSE to show the financial position of the CSE. He referred to paper book 25 that amount in question was deposited for obtaining corporate membership. He has submitted that assessee was in a business of stock broker, therefore, non-refund of security amount was a business loss and should be allowed as a business deduction. He has referred to written submission and paper book 1 to 15 in which the same facts are reiterated. He has relied upon the order of the Income-tax Appellate Tribunal, Ahmedabad Bench, "A" in the group cases of Asst. CIT v. H. Nyalchand Financial Services Ltd. (I. T. A. No. 2631/Ahd/2004) copy filed in which on the identical facts, the Departmental appeal has been dismissed by following earlier order of the Tribunal in the case of Paarker Securities Ltd. (I. T. A. No. 752/ Ahd/2004 and I. T. A. No. 340/A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CSE and written off in the books of account are in the nature of the CSE deposit without interest, the CSE deposit for settlement guarantee fund and the CSE deposit for UPS. The hon'ble Punjab and Haryana High Court in the case of CIT v. Amrik Singh Surinder Singh [2008] 296 ITR 350 held as under (headnote) : "that there being a valid agreement between the parties, the assessee having agreed to share the responsibility of bad debts on account of non-recovery of the amount of liquor supplied through its agency as one of the obligations in lieu of commission and bad debts having been incurred on account of non-recovery of such dues from the subsequent buyers, it was related to the business of the assessee. It was deductible as business loss." The hon'ble Supreme Court in the case of Dr. T. A. Quereshi v. CIT [2006] 287 ITR 547 held as under (headnote): "reversing the decision of the High Court, (i) that the Explanation to section 37 had no relevance as this was not a case of business expenditure but was one of business loss. Business loss was allowable on ordinary commercial principles in computing the profits. Once it was found that the heroin seized formed part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
