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2008 (11) TMI 441 - AT - Income TaxClaim of ‘Bad debts written off' in the P&L account as business loss u/s 28 - bad debts not crystallised in this year - margin is non-existent is not adequately proved - AO denied the benefit of ‘bad debt’ as the claim did not fulfil the conditions specified u/s 36(2) - he held that such loss is not a legitimate loss not allowable on this account - CIT upheld the action of the AO - CIT allowed the appellant’s claim of business loss u/s 28(i) - Since, the written of principal amount does not qualify for deduction 36, the same has to be allowed as business loss as this amount forms an integral part of the appellant’s business. Since, the dispute regarding this liability was settled in the year under consideration, the loss in the hands of the appellant has to be taken as relating to the previous year relevant to current assessment year. Thus, this amount qualifies to be allowed as business loss of the appellant. HELD THAT:- We have examined the notifications issued by the SEBI or agencies and find these notifications are issued mainly in the context of the Risk Management, rather than as a penal provision for punishing the defaulters or deeming the transactions illegal. Therefore, we are of the considered opinion that with or without the provisions of the margin money the loss cannot be held as illegal loss denying the benefit of set off the same defaulter against the income or allowing the same to carry forward to the later years. There are numerous decisions of the coordinate Benches of the Bombay Tribunal where such losses, which are incidental to the clients purchase orders of the shares are deemed as business loss of the assessee. The same is allowable even if it belonged to earlier years as the said amounts are written off during the year under consideration. Therefore, judgment of High Court in the case of CIT v. Gawalior Rayon Silk Manufacturing (Wvg.) Co. Ltd.[1998 (11) TMI 102 - BOMBAY HIGH COURT] applies to the case of the assessee. In view of the same, we are of the considered opinion that the order of the CIT(A) does not call for any interference. Accordingly, grounds 1 & 2 of the Revenue are dismissed. Deletion of the penalty paid to the stock exchange - payment to NSE is not for violation of any provision of SEBI Act - AO held that the payment was incurred for filing the rules and regulations of such violation is a punishable offence - HELD THAT:- As seen from the notifications issued by the SEBI. We find that such margins are imposed in order to reduce the risk components and, therefore, these are basically risk management oriented penalties, which are routine in nature. We also find that these violations are offer by payment of penalty as in the instant case. Having regard to the purpose of the provisions of section 37(1) which is aimed at providing deterrence for infraction of Acts of the country, the violation as in the instant case, are not found to attract the provisions of the said proviso. Therefore, we are of the considered opinion that this is not fit case of invoking said proviso. Accordingly, order of the CIT(A) does not call for any interference. Accordingly, ground of the revenue is dismissed. In the result, appeal of the revenue is dismissed.
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