TaxTMI 
TaxTMI 
2019 (1) TMI 206
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....hedging nature as per principle laid down by Hon'ble Gujarat High Court in the case of Pankaj Oil Mill. As the same is treating as speculation loss within the meaning of section 43(5) of the Act, the same cannot be allowed to set off against the business scheme. 3. That the ld. CIT(A) has erred in law and on facts by deleting the addition of Rs. 2,02,676/- on account of prior period expenses without appreciating the fact that such expenses are to be considered in the year which it pertains. 4. The order of the ld. CIT(A) being erroneous and bad in law and acts is liable to be reversed that the order of the AO be restored." 3. Facts of the case are that the assessee is a commodity broker and it has written off in its books of accounts Rs. 61,26,915/- as bad debts. This amount was outstanding amount payable by the clients for whom it has done the brokering work and earned the brokerage. The part of the debt i.e. the brokerage amount has been taken into account as income. During the course of hearing vide letter dated 06.02.2014 the assessee had filed reply to show cause notice along with list of parties with amount as well as copies of ledger account of last three years of the p....
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....nto account in computing the income of the assessee. The debt comprised of the value of the shares transacted and the brokerage payable by the client. The brokerage as well as the value of the shares constituted a` part of the debt due to the assessee since both arose out of the same transaction. The fact that the liability to pay brokerage arose at a point in time anterior to the liability to pay the value of the shares transacted makes no material difference to the position. As the brokerage from the transaction of the purchase of shares had been taxed in the hands of the assessee as business income, the debt or part thereof has been taken into account in computing the income of the assessee and the requirements of section 36(1)(vii) r.w.s. 36(2) were satisfied. (Issue regarding the value of the shares which remain in the hands of the assessee which has to be adjusted against the amount receivable from the client left open)" 5. Since the ld. CIT(A) followed the order of earlier A.Y. i.e. 2010-11, respectfully following the judgement of Hon'ble Bombay High Court (supra), we dismiss this ground of appeal of the Revenue. 6. Now we come to ground no.2 with regard to deletion of dis....
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....purchase and sale of shares of other companies - Held, yes - Whether, in instant case, transaction in shares undertaken by assessee as its own under compulsion after certain clients disowned part of such transactions did not constitute its business of share dealing and therefore, loss incurred by assessee in such transactions did not fall within ambit of Explanation to section 73 - Held, yes - Whether, therefore, loss incurred by assessee on purchase and sale of shares in question was to be treated as business loss which could be set off against its brokerage income - Held, yes [In favour of assessee]" 8. Respectfully following the aforesaid judgment and in our considered opinion the ld. CIT(A) has passed a detailed reasoned order, the same does not require any kind of interference at our end. Thus, we dismiss this ground of appeal of the Revenue. 9. Now we come to third ground of appal with regard to deletion of addition of Rs. 2,02,676/- on account of prior period expenses without appreciating the facts that such expenses are to be considered in the year in which it pertains. 10. In this case assessee had paid the software expenses of Rs. 8,10,705/- for the period from 01.01.2....
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....ccounting years, how each of these expenses could be quantified in the year of consideration. The Tribunal affirmed the disallowance by observing that there is no dispute that the assessee-company maintained its books of account on mercantile basis. It was observed that if that is so, there was no justification in claiming these expenses for the assessment year under appeal. Having considered the material on record, we do not find any justification for the disallowance of the claim of the assessee on such abstract proposition. Merely because an expense relates to a transaction of an earlier year it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. In each case where the accounts are maintained on mercantile basis it has to be found in respect of any claim, whether such liability was crystallized and quantified during the previous year so as required to be adjusted in the books of account of that previous year. If any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the a....