TaxTMI 
TaxTMI 
2010 (11) TMI 507
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....oss and the same is not accordance with the conditions provided u/s 36(2) (i) and 28 of the IT Act " 3. Brief facts of the case are that the assessee claimed Rs.50 lakhs in respect of rental deposit paid by Broad Band Solutions Pvt ltd (in short BSPL) for the residential premises taken on behal of its employees. The BSPL was promoted by ENRON Group and incorporated on 29.12.1999. M/s Reliance Data Exchange Pvt Ltd a group concern of the assessee acquired 100% equity stake in BSPL and subsequently, BSPL was merged with assessee-company (REAL) with ef fect from 01.04.2002. The assessee submitted before the AO that the employees for whom the rental deposit was given left the service of the company before the BSPL was took over by the a....
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....sp; 5. On appeal, the CIT(A) has allowed the claim of the assessee as business loss. 6. Before us, the learned DR has submitted that the assessee has not produced any documentary evidence and details regarding the persons to whom the deposits were given. Secondly, the deposits were not the debts which has been taken in to account in computing the income of the previous year. Therefore, the claim of the assessee is not allowable as bad debts. He further contended that the company is rendering services for set ting up of industrial infrastructure Project related activities. Thus, it is clear that the assessee is not carrying business on banking or money lending. In these facts and circumstances, claim case is not maintainable as bad ....
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....bmitted that in the facts and circumstances of the case, unrecoverable amount is in the nature of business loss as deductible u/s 28 of the Act. Since the advances were for the business which is not disputed and the assessee has no details whatsoever about the persons to whom the advances were given, therefore, there is no likelihood to recovery of the said amount in near future. Under these facts the entire advances given has become business loss and can be allowed u/s 28. He has supported the order of the learned CIT(A). 8. We have considered the rival content ions and relevant record. As far as the explanation regarding the facts of taking over of the BSPL by the assessee which was promoted by ENRON Group and subsequently due to ....
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....of sales made during the year, but the fact that the deposit was given for obtaining accommodation for the employees of the erstwhile BSPL and such deposits was given for use of such rental accommodation by the employees of the company, this deposits is in fact a deposit given for the purposes of business and the non- recovery thereof is a loss to the business, which is not allowable e u/s 36(1) (vii) as baddebs should be allowed" 9. From the above content ions of the assessee i t is clear that the assessee has claimed the said unrecoverable deposits of Rs.50 lakhs as business loss u/s 28 whereas while deciding the issue, the AO has considered the same only in the light of the provisions of sect ion 36 (1) (vii). 10. The los....
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....f money by the employees should be permitted as trading loss or not? The Hon. Jurisdictional High Court at page 706 of the report has observed as under: "6. Now, in order to decide whether we should permit this loss as a trading loss, we must look at one or two facts which have been established. It was necessary for the business of the assessee company to employ Chhaganbhai as its cashier. It was also necessary for the business of the assessee company to delegate to the cashier certain duties. It was necessary for the cashier to go to the bank and bring money from the bank so that the money could be kept in the office of the assessee company, because the moneys had to spent for different purposes of the company. Therefore it is clea....