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2019 (5) TMI 35 - HC - Income TaxAddition u/s 68 - unsecured cash credit - HELD THAT:- CIT(A) accepted the genuineness of the transactions of sale and purchase of shares in question and his findings have not been challenged by the Revenue in the Departmental appeal, therefore, we are of the view that the assessee would be entitled for deduction of loss. CIT(A) was unjustified to direct the AD to allow loss as speculation loss u/s 73 of the Act. We accordingly, set aside the orders of the authorities below and delete the entire addition. Speculation loss u/s 73 - HELD THAT:- Where any part of the business of a company consists in the purchase and sale of shares of other companies, it is deemed to be carrying on a speculative business. In the present case, assessee falls within the exception carved out in the part of the section, which is found in the parenthesis (“other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on securities”, “Income from house property”, “Capital gains” and “Income from other sources”, or a company [the principal business of which is the business of trading in shares of banking or the granting of loans and advances); its total income mainly consists of income derived from the granting of loans and advances. Such being the case, the CIT(A) clearly falls into error in holding that the loss reported pertains to a speculative transaction; the ITAT acted correctly in law in setting aside that finding. Therefore, no question of law arises in this aspect. Write-off of bad debts - Write off of the principal amount - HELD THAT:- ITAT’s decision that since the claim for interest had been allowed in the past and was even granted in the current assessment year, the assessee legitimately could claim the write-off as bad debts even towards the principal, was based upon the ruling of the Supreme Court and of this Court [especially IFCI Venture Capital [2007 (7) TMI 674 - DELHI HIGH COURT] ], no question of law arises that the assessee in the first instance did not claim the write-off as a deduction per se that does not stop it or preclude it from claiming relief, given the judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT, (Central), Calcutta [1971 (8) TMI 10 - SUPREME COURT] . Furthermore, this Court is also of the opinion that Section 36(2) also applied to the facts and circumstances of this case. Disallowance u/s 14A - HELD THAT:- As during the year (AY 2005-06), the total expenditure incurred was about ₹ 90 lakhs. During the hearing, the break-up of these expenses was revealed: about ₹ 2.5 lakhs was spent on salaries; the rest was on professional fees (including legal fees) transport, maintenance of vehicles, stationery, postage, printing etc. It was within the power of the AO to have inquired into these items, to scientifically apportion amounts attributable to expenditure that could reasonably bear proximity with earning of tax exempt income; instead, the AO merely rested content with applying a proportion, which was not appropriate. Given that the funds and scrips (which yielded dividend) were legacy assets, the assessee’s arguments were reasonable - question relating to disallowance under Section 14A does not arise.
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