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2017 (7) TMI 821 - DELHI HIGH COURTClaim of bad debts - whether the ITAT was in error in proceeding on the basis that the above sum claimed by the Assessee as bad debt was its speculative loss? - Held that:- ITAT appears to have misconstrued the nature of the transaction involving the Assessee and the broker Kamlesh Kamal & Co. It also overlooked the basic fact that the Assessee was a finance and investment company. This is evident from its observation in the impugned order that: “Since the assessee himself was not engaged in dealing of shares, it cannot be said to have been engaged in trading of shares.” This was plainly contrary to the factual position. Thirdly, it was not the Assessee’s case to begin with before the AO, that the amount written off by it was a ‘speculative loss’. AO’s analysis of what really the transaction was, was based on the correct understanding of the legal position emanating from Section 36 (1) (vii) of the Act. Revenue is right in the contention that what was not shown to be part of the income of the Assessee for an earlier previous year could not possibly be written off as a debt in the year in question. The failure by the broker to return the aforementioned sum was at the highest a business loss and nothing more. It was not even the Assessee’s case that it was a speculative loss. The observations of the AO have been taken out of context. It was observed by the AO, in the process of negativing the claim of the Assessee that it was a bad debt, that “it may be cost of shares purchased, speculation loss of the Assessee or may assume any other form.” This could not be construed as the AO holding it to be a speculative loss. - Decided in favour of the Revenue
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