TMI Blog2019 (6) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... disagreed with the claim of the assessee by observing that the assessee did not show the amount of bad debts as income in any of the previous years - HELD THAT:- Bad debts claimed by the assessee on account of the amount recovered by the angel group from the assessee. Indeed, the amount recovered by the angel group from the assessee was not offered by him as income in his books of accounts. Therefore the condition as specified under section 36(2) of the Act has not been satisfied. Therefore, the amount of deduction as bad debts cannot be claimed. We note that the courts have allowed such claim of the assessee as bad debts as the same was incurred in the course of the business carried on by him. Therefore in our considered view, such loss is a business loss and the same is eligible for deduction as bad debts. As relying on BONANZA PORTFOLIO LTD. [ 2009 (8) TMI 636 - DELHI HIGH COURT] we hold that the loss incurred by the assessee in the course of the business is revenue in nature and the same is eligible for deduction as bad debts. Hence the ground of appeal of the assessee is allowed. - ITA No.54/AHD/2017 - - - Dated:- 24-6-2019 - Shri Mahavir Prasad, Judicial Member An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in connection with the cost of the plot. 2. Briefly stated facts are that the assessee in the present case is an individual and engaged in the business of trading in commodity and shares. The assessee in the year under consideration has sold his property amounting to ₹3,40,50,000.00 only and claimed the cost of acquisition against the sale consideration amounting to ₹84,31,880.00 only. The assessee out of such expenditure claimed to have incurred a cost of ₹20,74,880.00 towards the transfer fees and the development expenses in connection with such property. 2.1 However, the AO found that the assessee has not furnished any documentary evidence in support of the expenditure of ₹ 20,74,880.00. Therefore the AO disallowed the same and accordingly revised the capital gain calculated by the assessee. The aggrieved assessee preferred an appeal to the learned CIT (A). 3. The assessee before the learned CIT (A) filed the details of the expenditure incurred by him as detailed under: i) ₹ 4,02,000/- Transfer fee to society paid by cheque on 24.02.2007to the society. ii) ₹ 1,00,000/- again by cheque to the society for drainage c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t these expenses were incurred with reference to the said plot. The objection raised by the AO that whether these expenditure are of capital nature and not of revenue nature is controverted by the appellant. In the absence of all these details and supporting evidences the AO has rightly rejected the claim of the assessee of additional cost of ₹ 20,74,880/- and rightly recalculated the long term capital gain and the claim of deduction u/s.54F of the Act. Thus the ground of appeal is dismissed. 4. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. The learned AR before us filed a paper book running from pages 1 to 80 and drew our attention on page 48 of the paper book where the receipt issued by the society was placed. 5. On the other hand, the learned DR vehemently supported the order of the authorities below. 6. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the expenditure incurred by the assessee towards the transfer fees, and the development charges paid to the society in connection with the property held by the assessee. 6.1 In this regard we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence the ground of appeal of the assessee is allowed. The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the addition of ₹54,87,027.00 on account of the bad debts/loss incurred incidental to the business. 7. The assessee is holding the franchisee of the Angel group-a member BSE, NSE, MCX/SX and DP of CDSL. Accordingly, the assessee referred many clients to the angel group, which were doing business dealings with it. The assessee accordingly used to earn brokerage from the angel group for the transactions carried out by the clients referred by him. However, in many cases, the clients referred by the assessee to the angel group did not settle the accounts with it. Therefore, such amount was recovered by the angel group from the assessee. Accordingly, the assessee claimed the deduction of the amount recovered by the angel group as bad debts in his books of accounts on the ground that such bad debts were incurred in the course of the business. 7.1 However, the AO disagreed with the claim of the assessee by observing that the assessee did not show the amount of bad debts as income in any of the previous years. Thus the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) 2. CIT vs. Shreyas S. Morakhia 342 ITR 285 (BOM) 3. Innovative Brokerage P Ltd. vs. ITOITA No.6007/Mum/2007 4.5. The facts of the case and the submissions are considered. The AO has disallowed the claim of the assessee on the ground that the mandatory condition for claiming the bad debt had not been fulfilled by the assessee. A perusal of the facts of the case shows that clients of Angel Group make payment to Angel Group directly and that was the income of the Angel Group not the appellant. In case of not receiving any payment the Angel Group debited those amounts to the account of the assessee. These amount are not part of the income of the assessee as well not part of brokerage income. In such a situation, it cannot be said that these amounts has been taken account in the computation of income of earlier years. Case laws cited by the appellant are on different facts. In those cases the AO has disallowed the claim of bad debt on the ground that the assessee accounts only for income from brokerage and not the value of shares sold or purchased on behalf of a client. Here in the instant case, facts are totally different. Assessee is getting brokerage income onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account. Since this bad debt occurred in the year in question, it was shown by the assessee in that manner. Since the brokerage payable by the client was a part of the debt and that debt had been taken into account in the computation of the income, the conditions stipulated in sub-section (2) of section 36, read with section 36(1)(vii), stood satisfied. Hence, the assessee was entitled to the deduction of the bad debt claimed. 11.3 Similarly, we also find support and guidance from the judgment of Hon ble Bombay High Court in the case of CIT versus Shreyas S. Morakhia reported in 342 ITR 285 wherein it was held as under: Accordingly, it is held that the assessee is entitled to deduction by way of bad debts under section 36(1)( vii ) read with section 36(2) in respect of the amount which could not be recovered by him from his clients in respect of transactions effected by him on behalf of his clients apart from the commission earned by him. 11.4 In view of the above, we hold that the loss incurred by the assessee in the course of the business is revenue in nature and the same is eligible for deduction as bad debts. Hence the ground of appeal of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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