The Tax Publishers2012 TaxPub(DT) 0913 (Del-HC) : (2012) 045 (I) ITCL 0182 : (2012) 341 ITR 0480

INCOME TAX ACT, 1961

--Business expenditure--AllowabilityPenalty paid to NSE and DSE--AO disallowed the penalty of Rs. 1,99,856 paid by assessee to NSE and DSE on round that this payment was in the nature of penalty for violation of law and, therefore, was not allowable as an expenditure under section 37(1). Tribunal deleted the disallowance on ground that amount paid by assessee, a share broker to NSE for violation of trading beyond exposer limit, late submission of margin certificate and delay in making deliveries of shares due to deficiencies were deductible as a business expenditure, as the amount was paid during the course of business of assessee's business and these was no infraction of law. Held: Since AO had not been able to show why and how the findings of tribunal were wrong and incorrect and the payment was, in fact, in nature of penalty and not normal interest on delaed payment. Therefore, Tribunal was justified in deleting the disallowance.

Income Tax Act, 1961 Section 37(1)

INCOME TAX ACT, 1961

--Business deduction under section 36(1)(vii)--Bad debtsEstablishment of debt as bad debt vis-a-vis writting off of bad debts--AO on examination of the pofit and loss account noticed that assessee had debited an amount of Rs. 1,62,96,953 under the head 'bad debt written off. Thereafter, assessee was asked to justify the claim of bad debt shown in there name of B. AO disallowed the claim of deduction udner section 36(1)(vii) but did not doubt that the transactions iyself had taken place. AO examined that whether the transaction resulting in bad debt were undertaken in the individual capacity of B or on behalf of the company employing him. Tribunal allowed the deduction of bad debts. On appeal, AO submits thtat assessee had failed to file relevant contract notes and establish the loss/bad debts in the transaction for sale/purchase of shares. Held: It was not necessary for assessee to establish that the debt, in fact, had become irrecoverable. It was enough if the bad debt was written off in the books of accounts of assessee.

Income Tax Act, 1961 Section 36(1)(vii)

IN THE DELHI HIGH COURT

NEW DELHI SANJIV KHANNA & R.V. EASWAR, JJ.

CIT v. Prasad & Co.

ITA 219/2011

2 February, 2012

Appellant by : Kamal Sawhney, Advocate,

Respondent by : Piyush Kaushik, Advocate,

ORDER

This appeal by Revenue under section 260A of the Income Tax Act, 1961 (Act, for short) impugns the order dt. 31-3-2010 passed by the Income Tax Appellate Tribunal (for short, the tribunal) in the case of Prasad and Company Pvt. Ltd. The appeal pertains to the assessment year 2000-01.

2. The following two issues have been raised by the Revenue : --

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