Revenue appeal dismissed, all issues decided for assessee. Disallowances overturned based on legal precedents.

The appeal of the revenue was dismissed, and all issues were decided in favor of the assessee. The Assessing Officer's disallowance of the claim of write-off of bad debts, disallowance of loss on account of Marked to Market, and addition of tax liability under section 115JB without allowing credit of STT were all overturned in favor of the assessee based on various legal precedents and interpretations.

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Issues Involved:
1. Deletion of addition made on account of bad debts written off.
2. Deletion of disallowance of loss on account of Marked to Market.
3. Deletion of addition of tax liability under section 115JB by not allowing credit of STT from the tax payable under section 115JB.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made on Account of Bad Debts Written Off:
The Assessing Officer (AO) disallowed the claim of write-off of bad debts amounting to Rs. 1,24,683 on the ground that the amount is not covered by section 36(2) since the value of the stock was not a trading debt of the assessee. On appeal, the CIT(A) allowed the claim of the assessee by following the order of the Tribunal in the assessee's own case for the assessment years 2000-02 and 2004-05. The Tribunal noted that this issue had been previously decided in favor of the assessee in paragraphs 7 and 7.1 of the order dated 22.6.2009 in ITA no 3380/Mum/2008, which referenced the judgment of the jurisdictional High Court in the case of Star Chemicals Ltd and PR Share & Stock Brokers P Ltd. Additionally, the special bench decision in the case of Shri Shreyas S Morkhia, upheld by the jurisdictional High Court, supports the assessee's claim. Thus, this issue was decided in favor of the assessee and against the revenue.

2. Deletion of Disallowance of Loss on Account of Marked to Market:
The assessee had debited in the profit and loss account a provision for loss on mark to market of open contracts in equity index/stock futures, while ignoring the profit on such mark to market based on prudent principles. The AO disallowed Rs. 10,69,943, arguing that derivative contracts not accounted for at inception cannot form part of stock-in-trade and cannot be valued at the time of balance sheet preparation. On appeal, the CIT(A) allowed the claim by following the Tribunal's order in Edelweiss Capital Ltd. The Tribunal referenced its decision in Edelweiss Capital Ltd vs ITO (ITA no. 5324/Mum/2007), which held that derivatives held as stock-in-trade should be valued at cost or market price, whichever is lower, and anticipated losses should be accounted for while anticipated profits should not. This principle is supported by the Supreme Court's decision in Chainrup Sampatram vs. Commissioner of Income Tax and guidelines from the Institute of Chartered Accountants of India. Consequently, this issue was decided in favor of the assessee and against the revenue.

3. Deletion of Addition of Tax Liability Under Section 115JB by Not Allowing Credit of STT from the Tax Payable Under Section 115JB:
The assessee compared his total income under normal provisions with section 115JB before claiming rebate under section 88E, arguing that tax rebate is a step after determining income tax payable. The AO disagreed, holding that the rebate under section 88E should be akin to those in respect of LIP/PF and should not be compared with the income under section 115JB. On appeal, the CIT(A) allowed the claim by following the decision of the Bangalore benches of the Tribunal in M/s Horizon Capital Ltd vs ITO. The Tribunal noted that the Karnataka High Court in CIT vs M/s Horizon Capitals Ltd upheld that the rebate under section 88E should be deducted from the tax payable, ensuring no double taxation. This interpretation aligns with the legislative intent to avoid double taxation and provide a rebate for taxes already paid. Respectfully following the Karnataka High Court's decision, this issue was decided in favor of the assessee and against the revenue.

Conclusion:
In conclusion, the appeal of the revenue was dismissed, and all issues were decided in favor of the assessee.

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