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TMI Blog2018 (7) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) confirmed the disallowance by holding that the transaction cannot be held to be revenue in nature. Loss borne by the assessee is in the nature of a business loss. The business and commercial expediency of making the settlement with the client and agreeing to bear the loss to the extent of ₹ 3,78,440/- is very well established on records. - decided partly in favour of assessee. - I.T.A. No. 415/Ind/2016 - - - Dated:- 29-6-2018 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member Appellant by : Shri Ajay Tulsian, C.A. and Shri Kapil Shah, CA Respondent by : Shri R.P.Mourya, Sr. DR ORDER Per Kul Bharat, J. M. Appeal by the assessee is directed against the order of Ld. CIT(A)-I, Indore, pertaining to assessment year 2004- 05. 2. Ground Nos. 2 3 are not pressed. Hence, the same are dismissed as not pressed. 3. Ground no. 4 is of general nature and does not require any adjudication. 4. The only effective ground is ground no.1, which reads as under :- That the Ld. CIT(A) erred in confirming the disallowance of ₹ 3,78,440/- out of total expenses of ₹ 4,57,450/- being amount debited under the head err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as speculative loss and the same was disallowed to the extent it was not set off against the speculation income of ₹ 65,463/- offered by the assessee. The net disallowance was calculated at ₹ 3,91,987/- ( ₹ 457450 (-) 65463) on this income and added back to the total income of the assessee. The assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) out of total expenses of ₹ 4,57,450/- disallowed the amount of ₹ 3,78,440/- and confirmed the appeal, against which the assessee is in further appeal before this Tribunal. 7. The Ld. Counsel for the assessee reiterated the submissions as made before the Ld. CIT(A-I, which is placed on record in the paper book at page 51-53. The Third written submission is reproduced as under :- THIRD WRITTEN SUBMISSION 1. During the course of hearing it was observed by Your Honour that the amount of ₹ 3,91,987/- claimed to be for business purpose, but does it not amount to an expenditure of capital in nature in view of the fact that the appellant's income is only from brokerage. In this respect, it is most humbly reiterated that the amount claimed by the appellant was incurred solely for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled the dispute with the said client, it would have not only lost the business with that client forever and also the resultant brokerage income, but would have also faced litigation which had its own cost and consequences. 4. It is a settled position that bad debts claims are also allowed to share brokers, which claim comprises not only of brokerage earned but also of other amounts due from clients which may not have been routed through profit and loss account. Such claims are allowed for the simple reason that such losses occur in the normal course of business and are incidental to the core business of brokerage and also unavoidable. Therefore claim of bad debts in the case of brokers has always been treated as regular revenue expenditure and not a capital expenditure. The claim of bad debts has been regularly allowed even in the case of the appellant in future years at the scrutiny assessment stage itself. The present case before Your Honour, in the alternate, can very be equated with the claim of bad debts. In view of the above submission it is requested that the claim of the appellant being that of a regular business expenditure/loss and is not in the nature of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have also created litigation which would have cost the assessee with additional expense, time and energy. The Ld. Counsel for the assessee contended that the CIT(A) confirmed the disallowance by holding that the transaction cannot be held to be revenue in nature. The Ld. Counsel for the assessee further contended that the loss borne by the assessee of ₹ 3,78,440/- was in the nature of a business loss. The assessee has squared off the trades of the client in which the client suffered losses. The assessee settled the account with the client and agreed to bear the losses to the extent of ₹ 3,78,440/-. After settlement, the client resumed its transactions with the assessee and the assessee earned substantial income from the said client. Therefore, the business and commercial expediency of making the settlement with the client and agreeing to bear the loss to the extent of ₹ 3,78,440/- is very well established on records. The Ld. Counsel for the assessee contended that the disallowance made by the AO by treating the said loss as speculation loss and confirmed by the CIT(A) is not justified. The same may please be deleted. 9. The Ld. Departmental Representative sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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