TaxTMI 
TaxTMI 
2014 (1) TMI 82
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....he relevant facts are that the assessee, a company engaged in the business of commission agent, while declaring a total income of Rs.36,70,640/-, in its P&L Acc had debited an amount of Rs.20,51,601/- on account of bad debts. The said bad debts consisted of the following parties. a) Ganesh Pipes Pvt Ltd. Rs.20,00,000/- b) P.M. Zaveri & Co. Rs. 47,800/- c) Polymerck Leather Lite Rs. 3,801/- Rs.20,51,601/- However, in the assessment framed u/s 143(3) of the Income Tax Act, the AO disallowed the claim of the assessee amounting to Rs.20,00,000/- and Rs.3,801/- in respect of the parties Ganesh Pipes Pvt Ltd and Polymerck Leather Lite, respectively and thereby added an amount of Rs.20,03,801/- to the total income....
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....ship which is part of the debt that has been offered as income of the assessee in the previous year, the assessee has fulfilled the conditions for claiming the bad debt written of as per the provisions of Income Tax Act. Further, the Ld.Counsel has relied on the decision of the jurisdictional High Court in the case of CIT Vs. Shreyas S. Morakhia (2012) 342 ITR 285 (Bom) in support of the claim that when the brokerage due from the customers can be allowed for bad debt written off, nothing prevents from allowing of the commission due from the parties as bad debt written off. Alternatively, the Ld.Counsel for the assessee has claimed that the alleged bad debt has to be allowed as a business loss and thereby relied on the decisions in the cases....
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....usiness of share broker and thereby deciding that the ratio is not applicable to the facts of the assessee. Considering the nature of the business of the present assessee earning commission income, the ratio in the case of CIT Vs. Shreyas S. Morakhia, in our view, is squarely applicable to the case of the assessee and the commission due from the parties qualifies for bad debt written off under the provisions of the Income Tax Act. Therefore, the authorities below are not justified in disallowing/confirming the disallowance of bad debt written off against the claim of the assessee on this ground and the disallowance/addition made on this count is deleted. Resultantly, ground No. 1 is allowed. 3. Ground No. 2 is not pressed by the assessee....
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....perty. On sales of flats, assessee offered the income thereon as income from business and profession. In the assessment framed, the AO computed notional rental income of Rs.6,66,400/- in respect of its properties being 8.50% of the market value as on 01.04.2006 and thereby made the addition under the head 'income from house property' by treating the properties as 'capital assets' against the assessee claiming the same as 'business assets held as stock in trade'. According to the AO, due to the fact that the assessee has shown the flats under the head 'other fixed assets', the contention of the assessee that the flats were part of 'business assets' or 'stock in trade' was not acceptable. On appeal, the Ld.CIT(A) while observing that 'income ....
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.... under the head 'other fixed assets' is not justified as the treatment in the books of accounts, in our view cannot be the sole basis for arriving at a conclusion as held by the Hon'ble Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. CIT (1997) 227 ITR 172 (SC). It is relevant to state that the decision of the High Court of Gujarat in the case of CIT vs. Neha Builders Pvt. Ltd. (2008) 296 ITR 661 supports the proposition that if property is used as stock-in-trade, then said property would become or partake character of stock and any income derived from stock would be 'income from business' and not 'income from property'. Having noted the legal position that the provisions of Sec 23 and 24 of the Income Tax Act are no....