TMI Blog2011 (4) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of monies recoverable form sister concerns, and, following the principles laid down by Hon'ble Jurisdictional High Court in CIT vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY), the interest disallowance could not have been made - Decided in favor of the assessee Business loss - set off of loss on sale of mutual funds against delivery based share trading income - Held that:- The profit arising on sale and purchase of shares, even if these are delivery based transaction will be treated as belonging to speculation business within the meaning of Explanation to Section 73. Thus once the assessee is carrying on a speculation business and the profits and gains have arisen from that business during the course of the assessment year, the assessee is entitled to set off the losses carried forward from a speculation business arising out of a previous assessment year - in favour of assessee. Deemed dividend - transaction with GSP Securities as loan transaction on the ground that it was so treated by the auditors in their remark - Held that:- Persuing the ledger account of GSB Securities there are no payments by way of loans and advances to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .36(2) of the I.T. Act, 1961 as noted by the Assessing Officer." 3. In an interconnected ground of appeal, the assessee has raised the following grievances: 4. The learned CIT(A) grossly erred in law as well as on the facts and circumstances after holding and confirming that the amount of Rs. 12,92,123/- due from the three debtors have become not recoverable and become bad but failed to in concluding that the same is allowable as business loss u/s.28 of the I.T. Act, 1961." 4. The material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed bad debts of Rs. 12,92,123/-. These bad debts represented unrecovered dues from Sayaram Doshi (Rs. 8,09,603/-), Rajendra Mishra (Rs. 1,36,484/-) and M.M. Finvestrade Pvt. Ltd. (Rs. 3,46,035/-). It was also noted that arbitrator awards were in favour of the assessee in respect of all these debtors and that the assessee had also made efforts to obtain decree in respect of Sayaram Doshi, but yet monies could not be recovered. There was no dispute, however, that amounts were written off in the books of accounts. On these facts, the Assessing Officer disallowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer is aggrieved that the CIT(A) held the bad debts to be allowable in principle, while the assessee is aggrieved that the CIT(A) did not adjudicate on assessee in alternative plea of claim being admissible also on the ground that it is in the nature of business loss. 8. Having heard the rival contentions, we see no reasons to interfere in the matter. It is so far the reason that, as agreed by learned representatives, the issue in appeal is how squarely covered in favour of the assessee by Hon'ble Supreme Court's judgment in the case of TRF Ltd. vs CIT 323 ITR 397 (SC). As regards learned DR's suggestion that the mater should be remitted to the file of the Assessing Officer so as to verify compliance with section 36(2), we have noted that CIT(A) has himself directed that the Assessing Officer has to allow deduction for bad debts only after he is satisfied that conditions of section 36(2) are satisfied. The directions given by the CIT(A) are quite justified and need no interference. As for learned counsel's prayer for adjudication on alternate plea, we see no substance in this request either once main plea itself is upheld, as is the position in this case, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debit balance is Rs. 4,53,50,151/- on 17.12.2003. The assessee has already stated that it is paying interest of Rs. 10,19,1448. 4.11 A summary of the comparative status of the three accounts is given below: Date O/D Account Ramakant Biyani GSB Share Custodian Services Ltd. Co-relation factor = (C+D) % B 04.04.2003 25,17,702.01 Dr 42,28,514 Dr (peak debit) 45,41,619.22 Dr 348 % 12.12.2003 4,53,50,151 Dr (peak debit) 33,20,747.84 Dr 50,87,802 Dr 18% 16.01.2004 A 2,03,91,638.11 Dr 32,13,559.05 Dr 1,58,48,651 Dr (peak debit) 93% 31.03.2004 14,04,555.80 Dr 12,72,479.21 Dr 73,25,094.11 Dr 612 % analysis of the above data shows that there is a direct corelation between the overdraft in the bank accounts and the debit balance in the account of the above said persons specified u/s.40A(2)(b) inasmuch as the assessee has net debit balance in Overdraft account on all the dates of peak debit and at the same time has debit balance in the accounts of the said persons. The last column gives the percentage of deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds have been utilised for he benefit of persons specified u/s.40A(2)(b) of the I.T. Act, 1961, the amount of Rs. 4,90,072/- is also considered as interest borne by the assessee and corresponds to the unreasonable and excessive benefits allowed to the said persons. Hence the amount is also disallowed u/s.40A(2)(a) of the I.T. Act, 1961. 17. In short thus, the Assessing Officer disallowed interest on the ground that interest bearing funds were used for non business purposes. The stand so taken by the ld DIT(A) was confirmed in appeal by the CIT(A), the assessee is aggrieved and is in appeal before us. 18. Having heard the rival contention and having perused the material on record, we are inclined to uphold the plea of the assessee for mere reasons than one. Firstly, as learned counsel rightly contends, what has been termed as diversion of funds by the Assessing Officer is not correct inasmuch as a plain look at the ledger account shows the sister concern's dues are commercial dues, on account of sales and purchases, and not on account of diversion funds. Even assuming that borrowed funds are blocked in these dues payable by sister concern; the funds are used in business on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005-06 26. Ground No.1 of revenue's appeal relates to deletion of sundry balances written off. 27. The Assessing Officer noticed that the assessee has debited an amount of Rs.8,707 as sundry balances written off. Before the Assessing Officer, the assessee could not furnish any details the reasons of written off. Therefore, the Assessing Officer was of the view that the sundry balances written off pertains to bad debt and conditions of section 36(1) (vii) and 36(2) were not fulfilled and, therefore, the claim was disallowed and added back to the total income of the assessee. Aggrieved, the assessee carried the matter in appeal before the CIT(A), which was allowed by the CIT (A) on the ground that the amount takes place in normal course of business and is incidental to the business. Aggrieved, the Assessing officer is in appeal before us. 28. Having heard the rival contentions and having perused the material on record, we see no reason to interfere with the order of the CIT(A) considering the fact that the amount written off is very small and is incidental to the business. We, accordingly, uphold the order of the CIT(A). This ground is thus dismissed. 29. Ground Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, the profit arising on sale and purchase of shares, even if these are delivery based transaction will be treated as belonging to speculation business within the meaning of Explanation to Section 73. Hon'ble Bombay High Court, in the case of CIT vs Lokmat Newspapers Pvt Ltd (322 ITR 43), has held that irrespective of whether or not the profits on sale of shares arose from delivery based trading or non delivery based trading, as long as assessee is hit by Explanation to Section 73, the entire profits will be deemed to be speculation profits and, accordingly, losses from non delivery based activity will also be eligible for set off against profits from delivery based transactions as well. Their Lordships have noted "the submission of the revenue is that a loss which arises on account of a transaction of the sale and purchase of shares would constitute a loss from a speculation business for the purposes of the Explanation. But, that the profit which arises from a transaction involving the actual delivery of shares would not constitute a profit for the purposes of sub-sections (1) and (2) of section 73 in respect of which a set off can be granted", which has been rejected unequivocal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried forward from a speculation business arising out of a previous assessment year. 34. In view of above discussion and bearing in mind the entirety of the case, we see no reason to interfere to the conclusions arrived by the CIT (A) and, accordingly, confirm the same. 35. This ground is thus dismissed. 36. Ground Nos.4 to 9 read as under: "4. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in deleting the disallowance of Rs.1.81 lakhs made in respect of D-mat charges, without realizing the fact that these were composite charges alongwith transaction charges for professional and technical services rendered by the exchange to its members and the assessee has failed to deduct TDS thereon. 5. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in ignoring the fact that these services are exclusive in nature in as much they can only be availed by member of Stock Exchange. 6. On the facts and in the circumstances of the case and in law, the ld CIT (A) erred in accepting the argument that these are mere reimbursements when the position in law is very clear that determining an income component in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il) and Maximum amount due at a time during the year Rs.92,80,861.74 (P.F.Rs.16,00,000.00)" 42. The Assessing Officer also noted that the assessee held 25.90% of shareholding of GSB Securities Pvt Ltd., and, that the above transaction was covered by the scope of deemed dividend under section 2(22)(e) of the Act. The assessee'e explanation that the transaction with GSB Securities were in the nature of business transactions, and, accordingly, not hit by section 2(22)(e) was rejected. It was so done mainly on the ground that auditor has termed the same, as evident from note no.15 to notes to Accounts in Schedule J, as loan transaction. The Assessing officer also noted that the GSB Securities had sufficient accumulated reserves and surplus so as to attract the above loan as deemed dividend. An addition of Rs.48,87,150 was accordingly made to the returned income. Aggrieved, the assessee carried the matter in appeal before the CIT (A) but without any success. 43. The assessee is not satisfied and is in further appeal before us. 44. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable lega ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
