TaxTMI 
TaxTMI 
2017 (3) TMI 85
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..... s. / 3272/Mum/06, 1501 and 1052/Mum/2007-AY. s 2002-03 to 2004-05)and it reads as under: "18. The AO had disallowed bad debts amounting to Rs. 58, 76, 826/- which was due from various parties for the secondary market transactions and was claimed by the assessee as bad debts u/s 36(1)(vii) r. w. s. 36(2) of the Act. On appeal, the CIT(A) confirmed the action of the AO by observing as under:- XXXXX 21. After hearing the learned representatives of the parties and perusing the record, we find that the ITAT in asesssee's own case for AY 2001-02, allowed the bad debts claim of the assessee by observing as under:- "7............ We find that the issue is covered in favour of the aeeeesee by the decision of the Special Bench of the Mumbai ITAT in the case of Shreyas S. Morakhia (2010) 40 SOT 440. Respectfully following the decision of the Mumbai Special Bench in the case of Shreyas Morakhia, supra, we allow the entire amount of Rs. 34, 91, 528/- written off by the assessee as a bad debt u/s. 36(1)(vii). Assessee's appeal on this issue is allowed. " 22. Since the issue under consideration is identical to that of AY 2001-02, we respectfully follow the decision of ITAT....
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....res of market on the basis of blank demerit slips given by the clients, that CDM had admitted committing the fraud, that the assessee could not step into the shoes of sub broker and own the liabilities to pay compensation to the clients, that contractually the loss was to be borne by CDM, that business loss claimed by the assessee under section 28 of the Act was not allowable, that mere payment of compensation during the year under consideration would not satisfy the test of wholly and exclusively for the purpose of business, that expenditure incurred by the assessee was not allowable as business expenditure as per the provisions of section 37 (1) of the Act that compensation payments were made voluntarily by the assessee, that it was under no obligation to settle the claim of the clients, that voluntary payments, even though made for the purpose of preserving goodwill and reputation, were not allowable under the Act. He further observed that the assessee had recovered a sum of Rs. 25. 55 lakhs from CDM, that the assessee had parked the said amount in the liability side of the balance sheet, that the net loss, if at all admissible, was Rs. 2. 37 crores only, that it had claimed the....
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....ess purposes and because of commercial expediency, that to decide necessity and the commercial expediency was not the domain of the AO, that assessee had made payment to protect its reputation and its brand name, that it wanted to come out of the adverse publicity given to the incident by the local newspapers, that the payment made by the assessee was not excessive. The AR relied upon the f cases of Nainital Bank Ltd. (62ITR638); F. E. Dinshaw Ltd. (36ITR114);Sales Magnesite Pvt. Ltd. (214 ITR 1), Eastern Investments Ltd. (20ITR1);Sasson J. David and Co. Pvt. Ltd. (118 ITR 261);F. M. Chinoy and Co. Pvt. Ltd. (74 ITR780);Glaxo Laboratories(India)Pvt. Ltd. (114ITR110);Dhanrajgiri Raja Narasingirji (91 ITR 544);Tata sons Ltd. (18 ITR 460);Delhi Safe Deposit Co. Ltd. (133ITR756) and Walchand and Co. Pvt. Ltd. (65ITR381(SC). The DR relied upon the order of the FAA. 5. 4. We have heard the rival submissions and perused the material before us. We find that CDM, proprietor of MFS was affiliated as a broker to the assessee vide agreement dated 25/ 11/2004, that the sub broker had to assist the clients in buying/selling/dealing in securities through the assessee, that as per the agreement t....
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...., it would be open to such an assessee to do so notwithstanding the fact that a formal deed does not precede the incurring of such expenditure. v. In considering the question of commercial expediency it has to be found out as to whether the expenditure was such as would fall within the deductible items in the computation of profits. vi. The commercial expediency would include such purpose as is expected by the assessee to advance its business interest and may include measures taken for preservation, protection or advancement of its business interests. vii. It is not necessary for an assessee to prove the necessity of expenditure. It is also immaterial if a third party also benefits thereby. It is not for the authorities or the court to examine the purpose for which the assessee incurred the expenses for its commercial expediency. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue ....