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TMI Blog2011 (4) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... w Dlehi. It was stated an amount of ₹ 70,29,896 was outstanding from this party for its share trading account in assessee s business as a broker which was finally settled in August 2001 by way of final settlement amount received ₹ 20,00,000 and the balance ₹ 50,29,896 was written off the books and claimed as business loss. A confirmation from the said party dated 2.2.2006 was also submitted. It is noticed that the assessee had discontinued its share broking business in A.Y. 1997-98 when the BSE card was transferred to M/s. SSKI Investor Services Pvt. Ltd. Therefore, the said broking business had discontinued and therefore the allowability of loss arising due to this business was examined. The assessee vide letter dated 28.2.2006, submitted as follows:- With regard to bad debt claimed of M/s. Dholadhar Investments for A.Y. 2002-03, amounting to ₹ 50,29,896, in addition to our earlier submission we state that the same is claimed, as the client who was dealing with the assessee since the year 1994 could not pay due to financial constrains. Thus, the same should be allowed as revenue expenditure. It is undisputed fact that the debts of M/s. Dholadhar Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, the first appellate authority agreed with the findings of the Assessing Officer by holding as follows:- 7. I have carefully considered the arguments of the learned Counsel and the assessment order. For allowing any expense as a trading expense one has to examine whether it has been incurred wholly and exclusively for the purpose of business. From the perusal of facts, it is abundantly clear that the debt pertains to share broking business of the appellant which has been discontinued in the year 1997 and thereafter appellant has not shown any income from broking or sub-broking business. Therefore, the appellant cannot be said to have continued the business of broking against which the write-off of debt can be allowed. 5. Alternatively, the first appellate authority held that the conditions of section 36(2) of the Act, do not get fulfilled when assessee s business, at one point of time, was stock broking. Aggrieved, the assessee is in further appeal before the Tribunal. 6. Learned Counsel, Mr.Hiru Rai, appearing on behalf of the assessee, contends before us that the issue, whether conditions mentioned in section 36(2) of the Income Tax Act, 1961 (for short the Act ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) 229 ITR 475 (Ker.); and 8. Without prejudice, learned Counsel, alternatively, submits that this is a business loss as the claims and counter claims made by the assessee and its clients have been settled in the current year. He relied on the recordings made by the Assessing Officer at Page-2 of assessment order, on the factum that the claim has been settled in the current year. 9. Learned Departmental Representative, Mr. Sanjiv Dutt, on the other hand, controverted the submissions made by the assessee s Counsel. He contends that the issue, in this case, is different from the issue that was considered by the Special Bench in assessee s own case for earlier assessment year. The issue, according to learned Departmental Representative, is whether bad debt of a closed business will be allowed or not. He contends that this is not a case where the assessee has discontinued the business but a case where he has permanently closed down the business where he was dealing on behalf of the clients. He points out that the assessee had sold his stock exchange card and question of assessee acting as share broker for the third party, simply does not arise. He submits that share trading on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a common organisation, though the sale of shares is a single transaction and the purchase of those shares is also more or less of the same character; (3) The business of the company as well as the transaction relating to the shares were attended to as part and parcel of the assessee-company; (4) A common fund was utilised both for business purposes as well as for the purchase of shares. A part of the overdraft of ₹ 6,80,046 taken from the bank on 31st Dec., 1947, has been discharged from out of the income of the business; and (5) the share transaction work as well as the other business of the assessee- company were carried on in the same place of business. From the facts found by the Tribunal, it is clear that the share transaction as well as the other business of the company were dealt with by a common management, common business organization, common administration, common fund and common place of business. The business of the company of dealing in shares and the business of manufacturing sugar and other commodities constitute the same business within the meaning of s. 24(2).- Standard Refinery Distillery Ltd. vs. CIT (1965) 55 ITR 139 (Cal) : TC 45 R.502 reversed. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activity of processing remained the same and the business is the same business. 16. The Hon ble Kerala High Court in V.P. John, Janatha Medicals (supra), held that the assessee was having a composite business and mere discontinuance of one activity will not disentitle the assessee to the benefit of set-off of carry forward loss. 17. Now, coming to the judgment of Hon'ble Supreme Court in L.M. Chabda Sons (supra) relied upon by the Learned Departmental Representative, wherein the Court held that for the purpose of ascertaining of profit, if an assessee carries on several distinct and independent businesses, and one of such businesses is closed before the previous year he cannot claim allowance under s. 10, of an outgoing attributable to the business which is closed, against the income of his other businesses in that year. It is held that the head of income may be one i.e., business , whereas the components are different. It held that that the expenditure is a component inherent in the process of ascertaining the profits referable to a particular independent activity of business. The Hon ble Madras High Court in I.S. C. Machado (supra) was considering a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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