TMI Blog2022 (11) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee allowed the claim of the assessee holding that the expenditure/loss claimed by the assessee was an allowable expenditure u/s 36(1)(vii)/36(2) of the Act by way of a non-speaking order - HELD THAT:- The transactions in question, in our view is not bonafide transaction of sale of shares being stock in trade as alleged by the assessee. The facts speak itself that the underlying transactions is relating to the sale of immovable property i.e., land. Another fact on the file is that the assessee is neither in the business of purchase and sale of shares nor in the business of purchase and sale of immovable property, land etc. Therefore, the assessee, in our view, has treated the said shares as stock in trade for the purpose of evasion of due tax. The transaction in question, since was not related to the business activity of the assessee, therefore, the said land/shares cannot be said to be a stock in trade. Even if for the sake of argument it is assumed that the transaction was of sale of shares, the said shares cannot be treated as stock in trade of the assessee. Even otherwise, the said transaction of shares would be hit by the provision of Section 73 of the Act and this lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in admitting new documentary evidence during the appeal proceedings in violation of Rule-46A of the I.T Rule, 1962 and not referring the said documents to the A.O seeking Comments. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in deleting the addition of Rs 3,02,57,500/- made on the ground of bogus loss claimed by the assessee on sale of unquoted shares without considering the facts of the case. 3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the bogus loss claimed by the assessee on sale of unquoted shares even though the genuineness of transactions was not established before the A.O. during the course of the assessment proceedings though the onus of providing substantive evidences vests solely with the assessee. 4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred as findings are contrary to evidence and material on record. 5. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,57,500 as Loss on Sale of Shares under the head Other expenses in its Profit Loss Account. In this regard, it is submitted that the appellant company had purchased 19,000 shares of Aryaman Construction Pvt Ltd on 01,04.2010 from Neerza Jhunjhunwala. The said shares were purchased at a cost of Rs. 7017.50/unit and thus the cost price of the said shares was Rs. 13,33,32,500/-. The said shares were held as stock in trade in the books of appellant company. The appellant company agreed to sell the said 19,000 shares of Aryaman Constructions Pvt Ltd to Mr. Radhe Shyam Saraf on 02.03.2011@ Rs. 7,017.50 i.e. at the same price as the purchase price on the following terms and conditions: i. No. of shares 19,000 @ Rs. 7017.50 ii. The seller i.e. the appellant company shall ensure mutation of land belonging to the company is carried out along with other legal formalities if any within 6 months from the date of agreement. iii. Payment - The purchaser of shares shall pay to the seller total Rs 13,33,32,500/- within six months from the date of mutation of land, subject to the above legal formalities being complied to by the seller. Copy of the agreement of sale of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, from the above it is clear that the appellant company received only Rs. 10,30,75,000/- against sale of shares of 19,000 shares of M/s Aryaman Constructions Pvt Ltd which was originally purchased at Rs. 13,33,32,500/-. Thus, it is clear that the amount receivable was Rs. 13.33,32,500/- but actual receipt was Rs. 10,30,75,000/- and the balance was not received as the buyer refused to pay. So, the assessee incurred bad debt in this year on account of non-recoverability of debt. In connection to the above it is submitted that the loss on sale of shares amounting to Rs. 3,02,57,000/- constitutes bad debts written off. In this light it needs to be brought to your kind notice that the claim for bad debt is to be allowed in the year in which the bad debt has been written off as irrecoverable in the accounts of the assessee and the assessee is not required to establish the debt to have become bad in the relevant previous year. Reference in this regard is invited towards the provisions of section 36 of The Income Tax Act, 1961. The relevant extracts of the said section reads as under: Other deductions. (i) The deductions provided for in the following clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable.The Hon ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010 (available in NJRS 2010-LL-0209-8), has stated that the position of law is well settled. After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee. 4. In view of the above, claim for any debt or part thereof in any previous year, shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. by Shri Radhe Shyam Saraf, was in fact amount received from sale of immovable property i.e., a piece of land. As per the agreement, the price was agreed at Rs.7017.50/- per share for 19000 shares. The assessee was supposed to get the mutation of the land transferred/sanctioned along with legal formalities. Since the assessee could not get the mutation transferred/sanctioned within six months from the date of agreement, therefore, the buyer Shri Radhe Shyam Saraf wrote a letter dt. 16/03/2012, requesting the assessee company to accept payment of the said 19,000 shares @ Rs.5425/- per share, totalling to Rs.10,30,75,000/- as against the originally agreed rate of Rs.7017.50/- per share, totalling to Rs.13,33,32,500/-. The assessee, therefore, claim the above loss as debts written off. 7. The ld. D/R has submitted before us that this was a sham transaction made by the assessee of sale of shares whereas, the underlying transaction was relating to immovable property. The ld. D/R has also brought our attention to the fact that the business of the assessee is trading of iron and steel products. That the purchase and sale of shares was never the business of the assessee. Even the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 8[the principal business of which is the business of trading in shares or banking] or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section7, be deemed to be carrying on a speculation business7 to the extent to which the business consists of the purchase and sale of such shares.] 8. The ld. D/R, therefore, has submitted that the aforesaid loss, even otherwise, is not allowable as business loss or as bad debt written off claimed by the assessee. 9. The ld. A/R, on the other hand, has relied upon the provisions of Section 36(1)(vii) (2) of the Act to submit that the assessee has rightly claimed the loss as bad debt written off. 10. We have considered rival contentions and gone through the record. 11. The transactions in question, in our view is not bonafide transaction of sale of shares being stock in trade as alleged by the assessee. The facts speak itself that the underlying transactions is relating to the sale of immovable property i.e., land. Another fact on the file is that the assessee is neither in the business of purchase and sale of shares nor in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities Ltd. (G.A. No. 2122 of 2014) dt. 11/06/2018 In these case laws, Hon ble High Courts have been unanimous to hold that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act. 13.1. The ld. D/R, however, has relied upon the newly inserted explanations to Section 14A of the Act, which is extracted for the sake of ready reference:- 14A. [(1)] [Notwithstanding anything to the contrary contained in this Act, for the purposes of] computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] ************************ *********************** [Explanation.-For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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