9911796707
TMI Blog2014 (1) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the books of accounts, cannot be the sole basis for arriving at a conclusion - Following CIT vs. Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] - If property is used as stock-in-trade, then said property would become or partake character of stock and any income derived from stock would be 'income from business' and not 'income from property' - The authorities below are not justified in adding the notional rent computed in respect of the properties under the head 'income from house property' - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt is not allowable. On appeal, the Ld.CIT(A) confirmed the said disallowance as the debt had not been offered as income in the relevant year and also the assessee offering the commission as income did not satisfy the requirement of section 36 (1)(vii) of the Act. Aggrieved by the impugned decision, the assessee has raised this ground in appeal before us. 2.2 Before us, the Ld.Counsel for the assessee has stated that it is not in dispute that the assessee procures orders from customers and forward it to M/s Finolex Industries Ltd (FIL) and FIL supplies materials directly to the customers. As per the agreement, the assessee has to make the payments to FIL within 15 days on dispatch of materials and the customers are given a credit period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parately account for sales and purchases. Now the legal issue before us is whether or not the commission due from the parties qualifies for bad debt written off under the provisions of the Income Tax Act. It is relevant to mention that in the case of CIT Vs. Shreyas S. Morakhia (supra), the assessee has acted as a sub broker and purchased shares on behalf of his clients and the assessee has credited only brokerage. When the assessee has claimed the brokerage amount irrecoverable from the clients as bad debt written off, the Hon'ble High Court of Bombay has held that the brokerage from the transaction of the purchase of shares which has been taxed in the hands of the assessee as business income, the debt or part thereof fulfils the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the proceedings, vide letter dated 18.06.2012, the assessee has raised some additional grounds which read as under: "1. The Ld.CIT(A) failed to appreciate that as the properties were held to be ready to be let out, S. 23(1)(c) is applicable and hence the rent received should be taken as Nil for computing income from house property. 2. The Ld. AO and CIT(A) erred in not reducing municipal tax paid from gross rent as per S. 23 of the I.T. Act 1961 while computing income from House Property." Since the said additional grounds involve question of law which emerges from the facts on records in the assessment proceedings, we admit the same and proceed to adjudicate the issue involved in all the said grounds. 4.1 Briefly stated, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) r.w.s. 254 for AYs 1996-97 and 1997-98 reveals that the AO has accepted that the assessee is engaged in the business of purchasing and selling of flats, galas, offices, go-downs. Also, the perusal of the audited balance sheets available on record indicates that the assessee in earlier years and in subsequent years has disclosed the profit earned on sale of properties as 'business income' and the same has been assessed as 'business Income'. These facts suggest that the assessee, besides commission business, is also engaged in business of buying and selling of properties and the assessee is holding the flats as business assets which are not disputed. In view of that matter, we are inclined to accept the contention of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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