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2013 (12) TMI 481 - AT - Income TaxBad debts on running and terminated chit funds - Held that:- Following assessee's own case for AY 2009-10 - The amount of loss incurred by the assessee has to be allowed on both running and terminated chits if irrecoverable if the prized chit amount has gone out of the hands of the assessee - Bad debts can be allowed to the extent of instalments defaulted by the prized subscribers and written off as bad debt in the books of the assessee - The issue was remitted back for fresh adjudication. Taxability of foreman dividend - Held that:- Following assessee's own case for earlier A.Y. 1991-92 to 1994-95 - The assessee was a business concern and its aim was to make profits and, thus, the principles of mutuality could not be applied to it - The assessee had earned income for the purposes of its business and to be utilised only for the purposes of its business - The assessee company participated in chits promoted by other companies or entities - Profit earning was the motto of the assessee- company - The profits in question arose and accrued from the trade or vocation which it carried on. The principles of mutuality are based on the concept that no one can make profits out of himself. The essence of mutuality is of complete identity between the contributor and the participator - Decided against the assessee. Commission on cancelled chits - Held that:- Following assessee's own case for A.Y. 2009-10 - The amount that is payable to the defaulting subscriber consequent to his replacement by another person the company is entitled to deduct 5% as commission - This has nothing to do with the regular commission Income of the assessee - The commission Income accrues when the accounts have been finally settled to the defaulting non subscriber - In case of a non-prized subscriber the amount of 5% would be deducted from the amounts due to him much before the settlement of his account and recognised as income by way of transfer from current liabilities to profit and loss account - Decided against Revenue. Royalty payment - Held that:- The payment of royalty at 0.5% of having regard to the business requirements of the assessee is for legitimate benefit taken in the course of business and from any standard, it cannot be said that payment of Rs.1 lakh as royalty is sufficient to produce the business of the magnitude procured by the assessee over the years - The holding company has entered into similar agreements with other subsidiary companies and the CIT(A) has considered the same to be reasonable business outflow property under a specific agreement executed by the parties is very much reasonable and should have been accepted as a business expenditure allowable as deduction - Decided against Revenue.
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