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TMI Blog2016 (3) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... itory services. The AO completed the assessment by making the following additions/disallowances: Sl.No. Particulars 2007-08 2008-09 1. Income from STCG treated as business income 77,50,201 2,31,93,041 2. Disallowance u/s 14A 1,50,000 3,00,000 3. Donation disallowed 50,000 - 4. Bad debts written off - 58,84,364 2.1 Assessee's main business was stock and share broking, depository services and portfolio management services. Assessee offered incomes from trading, brokerage, portfolio services, capital gains etc. Assessing officer for the reasons that the sale of shares on which short term capital gains was declared has fulfilled the norms of trading, treated the same as business income. For AY 2007-08, assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. If there was a change in the assumptions based on which investments decision was originally made. c. If there was an urgent requirement of funds for which it was necessary to liquidate the investment. It was also submitted that assessee maintained separate DMat accounts and transactions are shown in Investment accounts only and was accepted in earlier years as such. The AR relied upon various decisions in support of assessee's claim, which were mentioned by the CIT(A) in his order at page 7 & 8. 5. The CIT(A) after examining the issue elaborately with Board Circulars, judgements of Hon'ble Supreme Court and Hon'ble AP High Court for both the years under consideration, held that the gains on shares categorized as investment in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, has held that sale of shares would constitute business income. 8. The ld. AR submitted that the ld. CIT(A) has made cogent and objective analysis of the factors involved and has come to the correct conclusion that the gains on shares as capital gains. He further submitted that assessee has substantial dividend income over the years. Assessee was admitting short term capital gains from the investment made even before section 111A was inserted w.e.f. 2005-06 when short term capital gains was taxed at the special rate of 10%, which was later increased to 15% w.e.f. 01/04/2009. This would show that assessee was making investments with objective of earning dividend income and that the short term capital gains was being earned even w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. It is observed that assessee is clearly an investor in respect of the shares categorized as investments even at the time of purchase and that they were only treated as such in the books. The fact remains that for over 10 years the assessments were completed after scrutiny without any doubt or disturbing the nature of income from short term capital gains. The Hon'ble jurisdictional High Court had considered the principle of consistency as against the principle res judicata. The Hon'ble High court has also taken support of the cases in Escorts Limited (2011 338 ITR 435 [Delhi],) Danos Pandole in (2011) 330 ITR 485 (Bom.) and Gopal Purohit (2011 336 ITR 287 [Bom.] ). The decision of the Hon'ble A.P High Court in the case of Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its employees to the extent of Rs. 1,05,74,635/- of which a sum of Rs. 46,90,271 was recovered and the balance sum of Rs. 58,84,364 was claimed as a bad debt. Assessee submitted that it did not file a complaint with the police for the following reasons: a. The business of the company was sensitive in nature and its reputation was of paramount commercial importance. b. The employees concerned had left a suicide note due to which the focused on recovery of the amounts instead of taking action against the persons concerned. Assessee also submitted that due to its efforts, it had recovered a sum of Rs,46,90,271 from the perpetrators who had also submitted confession letters. 11. The Assessing Officer did not accept assessee's plea. He hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the amendment of section 36(1)(vii) of the Income-tax Act, 1961, with effect from April 1, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for assessee to establish that the debt, in fact, has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of assessee." In view of the above judgment, it is settled law that once the bad debt is written off as irrecoverable in the books of assessee, the claim of bad debt cannot be disallowed. Moreover as held by the honourable Bombay High Court in the case of Shreyas S Morakhia 342 ITR 285 and by Honourable Delhi High Court in the case of Bonanza Portfolio Ltd 320 ITR 178, as assessee offered brokerage income which was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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