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TMI Blog2012 (8) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... losses incurred in carrying on business or profession. As decided in Badridas Daga Versus CIT [1958 (4) TMI 2 - SUPREME COURT] if the deduction is not allowable as bad debts, the Tribunal ought to have considered the assessee's claim for deduction as business loss - The fact that condition of bad debts were not satisfied by the assessee would not prevent him from claiming deduction as a business loss incurred in the course of carrying on business as share broker - in favour of the assessee - INCOME TAX REFERENCE NO. 43 OF 1997 - - - Dated:- 14-8-2012 - S.J.VAZIFDAR M.S.SANKLECHA, JJ. Sanjeev Shah alongwith Ms. Harshal Manik i/b M/s. Rustamji Ginwala for the Applicant. Mr. Suresh Kumar for the Respondent. JUDGMEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business loss. He also held that the amount of Rs.11.81 lacs was a speculation loss and could not be allowed as a trading loss. So far as, the balance amount of Rs.33.17 lacs was concerned the Commissioner of Income Tax (Appeals) held that the same could not be considered as a trading loss. 5 On appeal before the Tribunal the assessee contended that even if the deduction is not allowable as bad debts under Section 36(1)(vii) of the Act, the aforesaid amount of Rs.44.98 lacs should be allowed as a business loss in computing the profits and gains earned in carrying on a business. The Tribunal held that once an assessee has made a claim for loss on account of bad debts then unless the assessee fulfills the requirements of Section 36(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the business and is related to the business operation is entitled to be deducted to arrive at the profits and gains of a business under Section 28 of the Act. In support thereof, he relies upon the decision of this court in the matter of Commissioner of Income Tax v. R.B. Rungta co. reported in 50 IR page 233. 7 As against the above, Mr. Suresh Kumar appearing for the Revenue submits that: a) The decision of this court in the matter of Shreyas S. Morakhia (Supra) will not apply to the present facts, as in this case the loss arose on account of a fellow member of the stock exchange not honoring its commitment; b) The amount claimed as bad debts is specifically provided for under section 36 of the Act and in such cases it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressing any opinion on the same. This for the reason that the issue framed for our opinion is whether, when the loss is not allowed as a bad debts can it be considered for the purposes of allowing the same as a business loss. In this case, we are not called upon to decide whether or not the loss claimed satisfied the test of the business loss but our opinion is on the more restricted issue namely whether such a loss could be considered as a allowable business loss. Therefore, we are not dealing with both the above issues. 9 Our opinion is sought on the issue, whether if an amount is held to be not deductible as a bad debt, in view of non compliance of the condition precedent as provided under Section 36(2) of the Act, could the same be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssarily have regard to the accepted commercial practice that deduction of such expenses and losses is to be allowed, if it arises in carrying on business and is incidental to it. 11 On the basis of the aforesaid decisions, it can be concluded that even if the deduction is not allowable as bad debts, the Tribunal ought to have considered the assessee's claim for deduction as business loss. This is particularly so as there is no bar in claiming a loss as a business loss, if the same is incidental to carrying on of a business. The fact that condition of bad debts were not satisfied by the assessee would not prevent him from claiming deduction as a business loss incurred in the course of carrying on business as share broker. 12 In fact this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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