2004 (1) TMI 327 - AT - Income Tax

ITAT Rulings: Penalty Disallowance Confirmed, Revenue's Appeal Dismissed on Loss Classification.

In ITA No. 1167, the ITAT reversed CIT(A)'s decision, confirming the AO's disallowance of the Rs. 25,000 penalty paid to the Delhi Stock Exchange, ... Addition made on account of penalty paid to the Delhi Stock Exchange - purchase and sale of shares - Penalty paid to Delhi Stock Exchange fine account - HELD THAT:- A perusal of the aforesaid leads to an inference that the legal aspect has been properly discussed and appreciated by the CIT(A). Admittedly, the assessee, being in the business of broking, would be facing situations wherein some of the clients do not own up the transactions on anticipating losses. In such situations, the consequential loss incurred by the assessee to honour the commitments is to be viewed as an integral part of carrying on of assessee’s business and is, therefore, not liable to be judged as a speculation loss. The decision of the jurisdictional High Court in the case of Bhagwan Das Rameshwaar Dayal [1984 (5) TMI 35 - DELHI HIGH COURT] supports the stand of the assessee. Reliance placed by the learned Departmental Representative in the case of SRJ Securities Ltd.[2003 (1) TMI 260 - ITAT DELHI-B] is, in our view, misplaced in so much as that the same is on different facts. Therefore, following the same, as the facts are on similar footing, we dismiss the appeal of the Revenue. In the result, the appeal is allowed and appeal is dismissed. Issues involved: Appeals by Revenue against CIT(A) orders for asst. yrs. 1992-93 and 1993-94.ITA No. 1167:The Revenue challenged CIT(A)'s deletion of Rs. 25,000 penalty paid to Delhi Stock Exchange. AO disallowed the expenditure, but CIT(A) allowed it. ITAT held that the penalty was not a normal expenditure, citing legal precedents. The orders of CIT(A) were reversed, and the disallowance by AO was confirmed. Revenue's appeal was allowed.ITA No. 4025:Revenue appealed against CIT(A)'s decision regarding a loss of Rs. 3,42,060 treated as speculative loss by AO. Assessee explained losses due to breach of contract and jobbing transactions. CIT(A) upheld part of the loss as business loss and part as speculation loss. Revenue appealed against this decision. Arguments were presented by both sides, with the Departmental Representative supporting AO's decision and the assessee's counsel citing legal precedents. CIT(A)'s order was detailed, emphasizing that losses due to breach of contract were not speculative. ITAT found the Revenue's reliance on a specific case to be misplaced and dismissed the appeal. Appeal No. 1167 was allowed, and Appeal No. 4025 was dismissed.