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TMI Blog2018 (6) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... s of share trading. The brief facts relating to the issue before us are brought out page 3 para 3 of the Ld. CIT(A) held as under: Brief facts of the case are that the assessee M/s Global Vision Securities Pvt Ltd is a Private Limited Company and is a member of NSE engaged in the business of Dealing in shares Securities having its Regd. office situated at 18, Rabindra Sarani, gate No.3, 5th floor, room no 2, Kolkata-70000 1. The assessee company had filed its return of the income u/s 139(1) on 30-09-2008 for the AY 2008-09, showing a total loss of ₹ 21309743/-. During the course of the assessment proceedings, the AO has disallowed a sum of ₹ 21660640/- by treating the same as business loss relating to earlier FY 2000-01. The assessee company had claimed business loss of ₹ 21660640/- in computation of income for the AY 2008- 09. In May 2000 outstanding position/outstanding delivery of the assessee company as per delivery receipt statement was closed out by NSE/NSCCL by wrongfully selling the shares even before the pay in date. The Act of NSE/NSCCL was not at all justified so the assessee company disputed the demands raised by NSE/NSCCL and filed a writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture on the happening of an event is not an expenditure. Contingent liabilities do not constitute expenditure and cannot be the subject-matter of deduction even under the mercantile system of accounting. Expenditure which was deductible for income tax purposes is towards a liability actually existing at the time but setting apart money which might become expenditure on the happening of an event is not expenditure . A distinction is often made between an actual liability in present and a liability de future which for the time being is only contingent. The former is deductible but not the latter. After going through the facts of the case and the ratio decided by the Apex Court is Shree Sajjan Mills Pvt. Ltd. case and Indian Molasses Company Pvt. Ltd. (supra). I think it is very clear that the liability of expenditure is to be considered in the year in which it is finally settled for expenditure. Accordingly, assessee s appeal on grounds no. 1 to 7 are allowed. Aggrieved the revenue is in appeal before us. 4. We have heard the rival submissions. On careful consideration of the facts and circumstances of the case, perusal of papers on record and orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egligence, irresponsible and illegal ad and NSCCL alone is responsible for losses arising out of this squaring up and its pending position could not be squared up on 3rd May 2000. The said squaring up is unilateral, wrongful, unauthorized and appellant cannot be liable for acts and omissions of NSCCL. (vi) The appellant company received a letter Dated 05.05.2000 from NSCCL along with 'Trades Done Report' dated May 05, 2000 for trades on 3rd May 2000 giving details of said close out by NSCCL. NSCCL also asked the appellant company to pay the outstanding dues failing which suitable action might be initiated. (vii) The assessee company disputed the demand raised by NSE/NSCCL and filed a Writ Petition in Calcutta High Court wherein the Hon'ble Calcutta High Court vide order dated 09.05.2000 stayed the collection of dues of NSE / NSCCL in following terms:- Let there be an interim order in terms of prayer (d) of the Petition till Tuesday Next with Liberty to apply for extension . Prayer (d) of the writ petition reads as follows:- ( d) Injunction restraining the respondents from giving any effect and /or further effect and/or acting pursuant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge losses which the appellant had to bear as there was no authorization from the appellant to NSCCL to dispose the shares and the action of NSCCL in disposing the shares which resulted in loss and demanding the payment from the appellant was a disputed issue. (xiv) The settlement benefitted both the appellant and NSCCL as the appellant was able to resume trading in NSEIL terminal and carry on its day to day business activity which had been suspended since the year 2000 which had hampered the business of the appellant. The payment made to the NSCCL was entirely loss incurred by the appellant which was debited in its books. (xv) NSE issued demand notice for the first time on 21-09-2007 requiring the appellant company to pay ₹ 1,52,48,599.69 to NSCCL for the purpose of re- enablement. NSE also advised that the exchange would inform the appellant company of further payments / requirement, if any. (xvi) The appellant company paid the sum of ₹ 1,52,48,599.69 by way of demand draft on 24-09-2007 in favour of NSCCL. (xvii) The appellant Company vide its letter dated 15-10-2007 referring to payments made to NSCCL as aforementioned requested NSE to permit re- enableme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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