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2015 (10) TMI 594 - ITAT MUMBAI

2015 (10) TMI 594 - ITAT MUMBAI - TMI - Denial of benefit of set off of the speculation loss - explanation to section 73 has to be applied on year to year basis and the set off of the loss cannot be allowed in the year in case the conditions laid down in the Explanation are not satisfied, irrespective of the fact that all the other circumstances when the Explanation to Section 73 was applied in A.Y. 2001-02 and that in A.Y. 2006-07 are same - Held that:- Once the assessee is carrying on a specul .....

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. DR. Thus, respectfully following the judgment of Hon’ble Bombay High Court in the case of Lokmat Newspapers P. Ltd [2010 (2) TMI 94 - BOMBAY HIGH COURT] we decide this issue in favour of the assessee company. Thus, the AO is directed to allow the set off the brought forward loss. - Decided in favour of assessee.

Disallowance of claim of bad debts - Held that:- The only objection of the authorities below was that the impugned amount was not allowable as deduction u/s 36(1)(vii). In o .....

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A, JJ. For The Appellant : Shri Madhur Agarwal (AR) For The Revenue : Shri Vijay Kumar Soni (DR) ORDER PER ASHWANI TANEJA, A.M. The present appeal has been filed by the Assessee against order dated 29.12.2010, passed by the Ld. Commissioner of Income Tax (Appeals)-12,Mumbai passed for the assessment year 2006-07. The assessee has raised following grounds of appeal:- 1. The learned CIT (A) has upheld the order of the Assessing Officer in respect of disallowance u/s. 14A. 2. The learned CIT (A) ha .....

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e claim of bad debts amounting to ₹ 14,39,878/-. The learned CIT (A) has concluded that the advance given to the broker is of a capital nature, irrespective of the fact that the income derived from the said advance is treated as business income and not income under the head 'Interest on securities'. Since the income is in the nature of business income, the bad debts have been claimed as a deduction u/s.36(1)(vii). 4. The Appellant craves leave to add, alter, amend, vary modify and .....

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isfied, irrespective of the fact that all the other circumstances when the Explanation to Section 73 was applied in A.Y. 2001-02 and that in A.Y. 2006-07 are same. 4. The brief facts are that the assessee company derived income from interest and trading in shares during the year under consideration. The assessee filed return disclosing interest income from the dividend income and share trading profit. The assessee also claimed the set off of loss brought forward from earlier years which was spec .....

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he Ld. CIT(A) but the Ld. CIT(A) confirmed the action of AO in denying the benefit of set off of the loss brought forward from assessment year 2001-02. Thus, the assessee filed an appeal before the Tribunal. 5. During the hearing before us, Ld. Counsel on behalf of the assessee company argued that the action of the AO in denying the benefit is contrary to law. The Ld. Counsel submitted that the issue is now no more res-integra, as this issue has been , settled by Hon ble Jurisdictional High Cour .....

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e. This fact is not disputed. Applying the same logic, the business in the current year on the share trading for the purpose of set off of brought forward loss should also be deemed as speculation business, as has been held by the Hon ble Bombay High Court in the case of Lokmat Newspapers P. Ltd. (supra). The relevant portion of the judgment is reproduced below: Quote: The Explanation to section 73 creates a deeming fiction. The Explanation postulates a situation where the assessee is a Company .....

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ing stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips, cannot be read into the provisions of section 73 having regard to the plain meaning of the Explanation to section 73. The contention that a loss which arises on account of a transaction of the sale and purchase of shares would constitute a loss from a speculation business for the purposes of the Explanation but that the profit which arises from a transaction .....

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e. Whether it is a profit or loss that has resulted from carrying on such business, is a consideration alien to the meaning of what constitutes a speculation business by the Explanation to section 73. Once an assessee is deemed to be carrying on a speculation business or the purpose of section 73, any loss computed in respect of that peculation, can be set off only against the profits and gains of another speculation business. Similarly, for the purposes of sub-section (2),the loss in respect of .....

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involving actual delivery of shares. No such restriction is found in the Explanation. In other words, once the assessee is carrying on a speculation business and the profits and gains have arisen from that business during the course of the assessment year, the assessee is entitled to set off the Losses carried forward from a speculation business arising out of a previous assessment year. Unquote: 7. Thus, perusal of aforesaid observations of Hon ble High Court clarifies this principle that once .....

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been brought to our notice by the Ld. DR. Thus, respectfully following the judgment of Hon ble Bombay High Court, we decide this issue in favour of the assessee company. Thus, the AO is directed to allow the set off the brought forward loss. 8. Ground no.3 deals with the action of Ld. CIT(A) in not allowing the claim of bad debts amounting to ₹ 14,39,878/-. 9. The brief facts are that the assessee made a claim of bad debts of ₹ 14,39,878/-, but the same was held to inadmissible by th .....

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ot income under the head of interest on securities and that since the income is in the nature of business income, the bad debts were claimed as deduction u/s 36(1)(vii). 10. During the course of hearing before us, the assessee, inter alia, raised an alternative plea that in any case the impugned amount of bad debts was allowable as business expenditure to the assessee company. In support of his arguments, the Ld. Counsel vehemently argued that this loss has been incurred by the assessee company .....

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CIT(A) should be upheld. 11. We have heard both the parties. This fact is not disputed that the impugned amount represents bad debts. The genuineness of the claim has not been doubted. The only objection of the authorities below was that the impugned amount was not allowable as deduction u/s 36(1)(vii). In our considered view the impugned amount is allowable to the assessee as business loss, in any case. We derive support from the judgment of Hon ble Bombay High Court in the case of Harshad J C .....

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