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TMI Blog2012 (10) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction, but not allowed by the AO and the Ld. CIT(A). Ground No. 3 is in respect of the finding of lower authorities that trading in derivatives (F & O) segments, leading to loss of Rs. 85,398/- is speculation loss u/s 43(5) of the Income Tax Act, 1961. 2. In regard to the amount of Rs. 5,82,802/-, the debt remained outstanding in the name of Shri G.P. Aggarwal, who was a senior executive of the assessee company. It was submitted before the AO that he had taken this amount towards office expenses. All of a sudden he resigned. He did not submit any bill or voucher of expenditure incurred against the aforesaid advance. The amount could not be recovered from him. Therefore, the amount was written off in the books of account. Initially thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting upon him to submit before the bills, vouchers or account statement. Therefore, the claim that the advance was made for business purpose has not been substantiated by any document. Thus, the claim has been denied. 3. Before us, the Ld. Counsel submits that the assessee - company had employed Shri G.P. Aggarwal as a technical and marketing personnel. He was also an employee - director in the assessee company. He was given advances from time to time and a sum of Rs. 5,82,802/- was found outstanding against his name. He suddenly left his employment as employee - director during December, 1999. No money could be recovered from him till financial year 2006-07. Therefore, this amount was written off in the books of account. The amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88/- represented money advanced to an employee as advance for the purpose of business of the assessee, which could not be recovered till financial year 2006-07, when it was written off. This is a loss incurred in the course of business. The same is allowable on first principles of accountancy and also under section 28. Therefore, we are of the view that this amount represents the business loss, deductible in computing the income. 4.1 The facts in regard to the other write off of Rs. 3,66,704/- are completely different. The assessee has taken up different positions at different points of time. This amount was stated to be an advance to Shri G.P. Aggarwal before the AO. The same position was reiterated before the Ld. CIT(A) in written submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is entitled to deduct a sum of Rs. 2,16,088/- in computing its total income and it is not entitled to deduct the sum of Rs. 3,66,714/- in computing the income. Thus, ground No. 2(b) is partly allowed. 5. The assessee had also written off a sum of Rs. 2.00 lacs standing in the name of M/s. Wimco Monnet Ltd. The submission of the assessee before the AO was that this sum represented earnest money paid to the aforesaid M/s. Wimco Monnet Ltd. No effective business could be done with this party. Therefore, the sum was written off in the books of account. This very explanation was tendered before the Ld. CIT(A). His finding is that there is no concrete evidence that the advance was made in the course of business. It is difficult to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount. Consequently it is held the assessee is not entitled to deduct this amount in computing the total income. Thus ground No. 2 (c) is dismissed. 6. In the result ground No. 2 is partly allowed. 7. Ground No. 3 is in regard to the treatment meted to the loss of Rs. 85,398/- incurred in trading in futures and options segment. The AO had not considered this issue in the assessment order. However, the Ld. CIT(A) called for the explanation. It was submitted that the loss was incurred in trading in futures, which does not constitute speculation loss. The Ld. CIT(A) came to the conclusion that the provision of section 43(5) is general in nature, which will not override the provision contained in section 73. Thus the loss was held to be specu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss to be treated differently from other business loss. Speculation loss can be set off against speculative profit in the same year or carried forward, as the case may be, to the next year to be set off against speculation profit, so however that it cannot be carried forward for more than four succeeding year in which the loss was computed. We are of the view that a harmonious interpretation will have to be made of these two provisions. If it is held that the provision contained in section 73(1) holds even in respect of the loss mentioned in aforesaid clause (d), the whole purpose of the insertion of the clause will be lost. This clause was introduced for facilitating trading of derivatives on recognised stock exchanges and, thus, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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