AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 1163
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.... loss under Section 28 of the Income Tax Act, 1961 or in the alternative bad debt under Section 36(i)(vii) of the Income Tax Act, 1961?" 3. The factual background in which the aforesaid substantial question of law arises for our consideration need mention. 4. The assessee is engaged in the business of sale of electrical goods, money lending and dealing in shares and mutual funds. The assessee has filed his returns of income on 08.10.2002 for the assessment year 2002-2003 declaring loss of Rs.24,74,584/- on account of the fact that fixed deposits with Krishi Bank having been lost on account of liquidation of the said Bank. The assessee claimed the aforesaid amount of Rs.24,74,584/- as deduction on the ground that the same is a trading loss or bad debt under Sections 27 and 28 of the Act. 5. The assessment under Section 143(3) of the Act was completed by the Assessing Officer on 31.12.2004 and aforesaid loss was disallowed on the ground that the said amount constitutes a capital loss. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The appeal was dismissed by an order dated 30.09.2005. Thereupon, the assessee filed an appeal before....
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....ub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year] : [Provided that in the case of] [an assessee] [to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause.] [Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standards notified under sub-section (2) of section 145 without recording the same in the accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as irrecoverable in the accounts for the purposes of this clause.] [Explanation 1.]- For....
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....its on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947); ] (iiib)[ cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India; ] (iiic)[ any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971; ] (iiid)[ any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] (iiie)[ any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);] (iv)[ the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;] (v)[ any interest,....
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....y way of bonus on such policy. ] Explanation. - For the purposes of this clause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (10-D) of section 10;] [(vi-a) the fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner;] (vii)[ any sum, whether received or receivable, in cash or kind, on account of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35-AD;] [Explanation 1 omitted by Act 4 of 1987, Section 28 (w.e.f. 1.4.1989).] Explanation 2. - Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business. Following Explanation 3 shall be inserted after Explanation 2 to Section 28 by the Finance (No.2) Act, 2024, w.e.f. 1-4-2025: Explanation 3.- ....
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....ctible if it is incidental to the business operations. The loss must be closely connected to the nature of the business and the risks inherent in carrying it out. In the case of a bank, the retention of money on its premises inherently carries risks such as theft, embezzlement, or dacoity, which are considered part of the normal business operations. The Court emphasized that the frequency or degree of the risk is less important than its direct relationship to the business, and the loss due to dacoity in this case was deemed a deductible trading loss as it was incidental to banking operations. 14. In Ramchandar Shivnarayan's case (supra), the Hon'ble Apex Court held that a loss arising from theft can be considered a trading loss and deductible when it is directly connected to an incidental to the business operations of the assessee. In this case, the loss of Rs. 30,000 was a result of money brought for the purpose of purchasing Government securities, which is an integral part of the assessee's business activities. The court emphasized that the loss, although not explicitly covered in the tax laws, was part of the ordinary course of business and, therefore, should be treated as a ....