Parklight Securities Ltd., Ahmedabad V. The ACIT, Circle-3, Ahmedabad

ITA 2949/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9013 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 29-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHALSR
• Assessee Lawyers: V R CHOKSHI
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 28/01/2010 DRAFTED ON: 28 /01/2010 ITA NO.2949/AHD/2006 ASSESSMENT YEAR : 2003-04 PARLIGHT SECURITIES LTD. ROOM NO.14 KAMADHENU COMPLEX NR.PANJRA POLE AMBAWADI, AHMEDABAD VS. THE ACIT CIRCLE-3 AHMEDABAD PAN/GIR NO. : AABCP 6609 A (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI V.R. CHOKSHI, C.A. RESPONDENT BY: SHRI GOVIND SINGHAL, SR. A.R. O R D E R PER BHAVNESH SAINI, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(APPEALS)-VII, AHMEDABAD DATED 20/11/2006 PA SSED FOR ASSESSMENT YEAR 2003-04, CHALLENGING THE DISALLOWAN CE OF RS.10,68,000/- WRITTEN OFF AS IRRECOVERABLE FROM THE DEPOSITS MADE WITH CALCUTTA STOCK EXCHANGE. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF LOWER AUTHORITIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 2 - 3. THE FACTS OF THE CASE ON THE ABOVE ISSUE ARE THA T ON PERUSAL OF ASSESSEES PROFIT & LOSS ACCOUNT, THE ASSESSING OFF ICER NOTICED THAT ASSESSEE-COMPANY HAS CLAIMED AN AMOUNT OF RS.10,68, 000/- AS A DEBIT ENTRY WITH DESCRIPTION CSE DEPOSIT WRITE OFF. AS PER THE DETAILS FILED BY THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE HAS GI VEN THIS DEPOSIT TO CALCUTTA STOCK EXCHANGE (CSE) AT THE TIME OF BECOMI NG A CORPORATE MEMBER OF CALCUTTA STOCK EXCHANGE (CSE). IN THE NO TES TO THE ACCOUNTS IT HAS BEEN STATED AS UNDER:- FIXED ASSETS OF THE COMPANY INCLUDE RS.10,00,000/- INVESTED IN CALCUTTA STOCK EXCHANGE CARD. FURTHER INVESTMENT OF THE COMPANY INCLUDES DEPOSITS (WITH INTEREST) WITH CSE AMOUNTIN G TO RS.8,29,957/-. LOOKING TO THE SITUATION OF THE CAL CUTTA STOCK EXCHANGE, WE ARE OF THE OPINION THAT THIS AMOUNT IS NOT RECOVERABLE AND HENCE NEEDS TO BE WRITTEN OFF IN THE BOOKS. 3.1. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EX PLAIN THE REASON FOR CLAIMING THE ABOVE DEDUCTION AND THE PROVISIONS UND ER WHICH SECTION THIS DEDUCTION IS ALLOWABLE. THE ASSESSEE FILED A COPY OF LETTER WRITTEN TO THE ADMINISTRATOR OF CALCUTTA STOCK EXCHANGE ASKING THE M TO PAY THE ASSESSEE INTEREST ON INTEREST BEARING DEPOSIT AND TO REFUND THE CAPITAL ADEQUACY DEPOSIT AS THE ASSESSEE HAS NOT DONE ANY TRADING BU SINESS IN THE FLOOR OF THE CONCERNED EXCHANGE. IT WAS ALSO SUBMITTED THAT ON ACCOUNT OF WEAK FINANCIAL AND LISTING POSITION OF CSE, THE ASSESSEE HAS STARTED RECOVERY ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 3 - PROCESS BUT NO AMOUNT WAS RECEIVED BY THEM FORM CSE . THE AMOUNT WAS ACCORDINGLY WRITTEN OFF. THE ASSESSING OFFICE R, HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE ON THE FOLLOWING REASONS: - (A) THE DEPOSIT WITH CSE IS NOT AN AMOUNT WHICH CONTRIB UTE TO THE PROFIT OF THE ASSESSEE. THEREFORE, IT CANNOT B E ALLOWED AS A BAD DEBIT. (B) THE APPELLANT HAS MADE NO EFFORT EVEN TO ASK CSE TO RETURN TO IT LET DOING MAKE EFFORT TO RECOVER IT FOR A LONG T IME. (C) THE ONLY LETTER WRITTEN BY THE APPELLANT TO CSE WAS ON 23.11.2005 I.E. AFTER THE A HAS RECEIVED THE SHOW C AUSE NOTICE FROM THE OFFICE OF THE AO AND NOT DURING THE FINANC IAL YEAR UNDER ASSESSMENT DURING WHICH THE AMOUNT HAS BEEN W RITTEN OFF. (D) EVEN IN THE SAID LETTER DATED 23.11.2005 THE APPELL ANT HAS NOT MADE ANY SPECIFIC REQUEST SEEKING REFUND OF THIS AM OUNT. (E) ACCORDING TO THE AO, CSE IS AN ENTITY WHICH IS BIG ENOUGH NOT TO ATTRACT WRITE OFF AND CSE, AT NO TIME, HAS N EGATED THE PAYMENT OF THIS AMOUNT. HENCE ASSESSEES ACTION O F WRITING OFF THIS AMOUNT EVEN AS A TRADING LOSS IS NOT CORRE CT AS IT IS NOT SUPPORTED BY ANY MATERIAL. 4. ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT(A PPEALS) AND SAME SUBMISSIONS WERE REITERATED. IT WAS EXPLAINED THAT ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF SHARE AND STOCK BROKING AND PURSUANT TO SUCH ACTIVITY IT HAS ACQUIRED THE CALCUTTA STOCK EXCHANG E CARD DURING THE YEAR 1999-2000. FURTHER, IT HAS MADE PAYMENT TO DEPOSI T AS REQUIRED FOR ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 4 - ACQUIRING CSE CARD. THESE DEPOSITS ARE CONNECTED WITH THE BUSINESS OF THE ASSESSEE AND, THEREFORE, THE SAID DEPOSITS WERE MADE FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT WAS SUBMITTED THAT D URING MARCH-2001, THE CSE HAS A PAYMENT CRISIS IN SETTLEMENT AND HUGE AMO UNT WAS MADE BY THE STOCK EXCHANGE. WITH A VIEW TO SETTLE AND OVERCOM E SUCH PAYMENT CRISIS, THE COMMITTEE OF THE EXCHANGE HAD UTILIZED DEPOSITS MADE BY EACH OF ITS MEMBER TOWARDS SETTLEMENT GUARANTEE FUND AND OTHER INTEREST-FREE DEPOSITS. IN VIEW OF SUCH POSITION, DEPOSIT MADE B Y THE ASSESSEE-COMPANY FOR RS.7,50,000/- COMPRISING OF RS.5,00,000/- TOWAR DS INTEREST-FREE DEPOSIT AND RS.2.5 LACS TOWARDS SETTLEMENT GUARANTEE FUNDS WAS UTILIZED TOWARDS SUCH CRISIS. EVEN THE LETTER DATED 02/05/2006 BY C SE CONFIRMED SUCH FACTS (PAPER-BOOK 27). IT WAS, THEREFORE, SUBMITTED THAT THE SECURITY DEPOSIT WAS NOT RECOVERED AND, ACCORDINGLY, IT WAS WRITTEN OFF AND WAS TREATED AS BUSINESS LOSS IN THE ASSESSMENT YEAR IN QUESTION. IT WAS FURTHER SUBMITTED THAT SINCE THERE WAS A FINAL CRISIS WITH CSE, THERE FORE, ASSESSEE WAS NOT ABLE TO CARRY ANY BUSINESS ACTIVITIES. THE ANNUA L AUDIT ACCOUNT OF CSE WAS PRODUCED IN SUPPORT OF THE CONTENTION THAT FINA NCIAL POSITION OF CSE HAS DETERIORATED. IT WAS, THEREFORE, SUBMITTED BEF ORE THE LEARNED CIT(APPEALS) THAT THE ASSESSING OFFICER WAS NOT JUS TIFIED IN DISALLOWING THE BUSINESS LOSS SUFFERED BY THE ASSESSEE. ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 5 - 5. THE LEARNED CIT(APPEALS) CONSIDERING THE SUBMISS ION OF THE ASSESSEE AND MATERIAL ON RECORD CONFIRMED THE FIND INGS AND DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS CONTAINED IN PARAGRAPH 9, 9.1. & 10 READ AS UNDER:- 9. I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE A PPELLANT HAS WRITTEN OFF THE AMOUNT DURING THE ACCOUNTING YEAR ENDING ON 31.3.2003. TO THIS EFFECT A NOTE HAS BEEN MADE IN THE ANNUAL ACCOUNTS WHERE IT IS STATED THAT IN THE OPINION OF THE APPELLANT THE AMOUNT FROM CSE IS NOT RECOVERABLE, HENCE NEEDS TO BE WRITTEN OFF. IN COURSE OF HEARING BEFORE THE AO IT IS SUBMITTED THAT THE CALCUTTA STOCK EXCHANGE WAS FACING FINANCIAL CRISIS AND IT H AS DEFAULTED ON PAYMENT RELATING TO A NUMBER OF SETTLEMENTS. BEYO ND THIS TWO STATEMENTS, NO OTHER DETAILS JUSTIFYING THE WRITE O FF OF THE DEPOSIT DURING THE ACCOUNTING YEAR 2002-03 HAS BEEN FILED E ITHER BEFORE THE AO OR BEFORE ME. 9.1.THE APPELLANT HAS REFERRED TO THE LETTER IT HAD WRITTEN TO CSE ON 2.5.2006 AND 16.3.2006 AND THE LETTER OF CSE DATED 22.6.2006. FROM THE ABOVE, IT IS CLEAR THAT THE APPELLANT HAS NOT WRITTEN ANY FORMAL LETTER TO THE EXCHANGE REQUESTING IT TO REFU ND AMOUNT BEFORE THE QUERY WAS RAISED BY THE AO IN COURSE OF ASSESSM ENT PROCEEDINGS DURING THE 2004-05 AND CERTAINLY NO EFFORT HAS BEEN MADE ON THE PART OF THE APPELLANT TO RECOVER THE AMOUNT DURING THE ACCOUNTING YEAR ENDED 31.3.2003. ON GOING THROUGH THE LETTER S OF CSE DATED 22.6.2006 AND 2.5.2006, THE COPIES OF WHICH WERE FI LED BEFORE ME, IT IS SEEN THAT NOWHERE THE EXCHANGE HAS STATED THAT I T IS NOT WILLING TO REFUND THE MONEY. FOR WRITE OFF THE AMOUNT DURING THE FINANCIAL YEAR 2002-03, THE APPELLANT HAS NOT RELIED ON ANY M ATERIAL WHICH SHOWS WEAK, THE ASSESSEE CANNOT HOLD THE DEBT AS I RRECOVERABLE WITHOUT MAKING AN ATTEMPT TO RECOVER THE DUES. NO EVIDENCE ASKING THE CSE TO RETURN THE DEPOSIT HAS BEEN FILED BEFORE THE AO OR BEFORE ME. THE AO HAS RIGHTLY POINTED OUT CSE IS A VERY BIG ORGANIZATION HAVING HUGE PROPERTY, AND THERE IS NO REASON TO HOL D THAT AMOUNT ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 6 - CANNOT BE RECOVERED FROM THIS ORGANIZATION. THE AP PELLANT HAS ALSO NOT MADE ANY SERIOUS EFFORT LIKE SENDING LAWYERS N OTICE OR MAKING A STRONG CASE FOR REFUND OF THE AMOUNT. IN ADDITIO N TO THIS, THE TIME OF WRITING OFF IS ALSO IMPORTANT TOT EH EXTENT THAT DURING THE FINANCIAL YEAR 2002-03, NO MATERIAL HAS BEEN BROUGHT ON RECOR D TO SUGGEST THAT THE AMOUNT IS NOT RECOVERABLE FROM CSE. IN CO URSE OF HEARING BEFORE ME THE APPELLANT HAS FILED A COPY OF ANNUAL ACCOUNTS OF CSE FOR THE PERIOD ENDING 31.3.2005 WHERE IT IS MENTION ED THAT THE STOCK EXCHANGE IS PASSING THROUGH A DIFFICULT TIMES. THI S NOITCE IS FOR THE PERIOD ENDING 31.3.2005. 10. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE APP ELLANT HAS FAILED TO JUSTIFY ITS CLAIM ON TWO COUNTS, (A) THAT REASON FO R HOLDING THE DUES AS IRRECOVERABLE AND (B) THE REASON FOR WRITING OFF THE AMOUNT DURING THE ACCOUNTING PERIOD 02-03 RELEVANT TO A.Y. 2003-04. THEREFORE, I HOLD THAT THE AO IS JUSTIFIED IN REJE CTING THE CLAIM OF THE ASSESSMENT PROCEEDINGS AND DISALLOWING THE SAME . THE DISALLOWANCE MADE BY THE AO IS HEREBY CONFIRMED. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LOWER AUTHORITIES AND REFERRED TO P APER-BOOK 27 WHICH IS LETTER OF CSE DATED 02/05/2006. PAPER-BOOK 56 NOTE ON ACCOUNTS OF CSE TO SHOW THE FINANCIAL POSITION OF CSE. HE REFERRE D TO PAPER-BOOK 25 THAT AMOUNT IN QUESTION WAS DEPOSITED FOR OBTAINING CORP ORATE MEMBERSHIP. HE HAS SUBMITTED THAT ASSESSEE WAS IN A BUSINESS O F STOCK BROKER, THEREFORE, NON-REFUND OF SECURITY AMOUNT WAS A BUSI NESS LOSS AND SHOULD BE ALLOWED AS A BUSINESS DEDUCTION. HE HAS REFERR ED TO WRITTEN SUBMISSION AND PAPER-BOOK 1 TO 15 IN WHICH THE SAME FACTS ARE REITERATED. HE HAS RELIED UPON THE ORDER OF ITAT AHMEDABAD BENCH A I N THE GROUP CASES ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 7 - OF ACIT VS. H. NYALCHAND FINANCIAL SERVICES LTD. & OTHERS (ITA NO.2631/AHD/2004 & OTHERS) COPY FILED IN WHICH ON T HE IDENTICAL FACTS, THE DEPARTMENTAL APPEAL HAS BEEN DISMISSED BY FOLLO WING EARLIER ORDER OF THE TRIBUNAL IN THE CASE OF PAARKER SECURITIES LTD. (ITA NO.752/AHD/2004 AND ITA NO.340/AHD/2006). 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMIT TED THAT THE AMOUNT IN QUESTION WAS ON ACCOUNT OF CAPITAL INVESTMENT AND THAT NO INCOME IS TAXED IN THE EARLIER YEAR, THEREFORE, BAD DEBT CANNOT BE ALLOWED. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASSESSEE ONLY ASKED THE CSE TO RETURN THE AMOUNT AND NO EFFORTS ARE MADE FOR RECOVERY OF THE SAME. THEREFORE, IT COULD NOT BE TREATED AS A BAD DEBT. THE CSE STATED THAT THE AMOUNT IS ADJUSTED IN THE ACCOUNTS OF THE ASSESSEE AS PER PAPER-BOOK 27 AGAINST THE LIABILITY OF THE ASSESSEE, THEREFORE, C SE NEVER DISPUTED THE LIABILITY OF THE ASSESSEE. THEREFORE, IT CANNOT B E ALLOWED AS BUSINESS LOSS. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF PALANI AND AVAR MILLS LTD. VS. CIT (1977)110 ITR 742 (MAD.). ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 8 - 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE NATURE OF BUSINESS OF THE ASSESSEE WAS STOCK BROKERS AND TRADING IN SHARES. EVEN THE ASSESSING OFFICER HAS MENTIONED THIS FACT ON THE TOP OF THE A SSESSMENT ORDER. IT IS ALSO NOT IN DISPUTE THAT AMOUNT IN QUESTION HAD BEE N DEPOSITED BY THE ASSESSEE FOR THE PURPOSE OF THE BUSINESS WITH CSE A T THE TIME OF BECOMING A CORPORATE MEMBER OF CSE. FOR CARRYING ON THE AF ORESAID NORMAL BUSINESS ACTIVITY, THE ASSESSEE HAD TO ACQUIRE MEMB ERSHIP CARD FROM CSE IN ORDER TO DO THE BUSINESS AT CSE. IT IS, THEREF ORE, CLEAR THAT THE ASSESSEE- COMPANY HAS MADE THESE DEPOSITS BEING PART OF THE B USINESS. THE ASSESSEE EXPLAINED THAT THERE WAS A PAYMENT CRISIS, THEREFORE, ASSESSEE REQUESTED FOR RE-FUND OF THE SECURITY AMOUNT. THE MATERIAL ON RECORD ALSO SUPPORTED THE VERSION OF THE ASSESSEE THAT THERE WA S A FINANCIAL CRISIS WITH CSE FOR MAKING THE PAYMENT. IT IS ALSO ESTABLISHED ON RECORD THAT CSE HAS NOT RE-FUNDED ANY AMOUNT OF THE SECURITY TO THE ASS ESSEE BUT ADJUSTED UNDER DIFFERENT HEAD. IT IS, THEREFORE, PROVED ON RECORD THAT THE SECURITY DEPOSITS WHICH WERE CONNECTED WITH THE BUSINESS OF THE ASSESSEE, ULTIMATELY THE SAME WERE NOT RETURNED TO THE ASSESS EE. MERELY BECAUSE IT WAS EXHAUSTED IN OTHER ACCOUNT BY ITSELF WOULD NOT PROVE THAT ASSESSEE DID GET BACK THE SECURITY DEPOSIT AMOUNT FROM CSE. TH E AMOUNT IN QUESTION ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 9 - WHICH WERE DEPOSITED WITH THE CSE AND WRITTEN OFF I N THE BOOKS OF ACCOUNT ARE IN THE NATURE OF CSE DEPOSIT WITHOUT IN TEREST, CSE DEPOSIT FOR SETTLEMENT GUARANTEE FUND AND CSE DEPOSIT FOR UPS. 9. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AMRIK SINGH SURINDER SINGH (2008) 296 ITR 350 (P&H) HELD AS UNDER:- THAT THERE BEING A VALID AGREEMENT BETWEEN THE PAR TIES, THE ASSESSEE HAVING AGREED TO SHARE THE RESPONSIBILITY OF BAD DEBTS ON ACCOUNT OF NON-RECOVERY OF THE AMOUNT OF LIQUOR SUP PLIED THROUGH ITS AGENCY AS ONE OF THE OBLIGATIONS IN LIEU OF COM MISSION AND BAD DEBTS HAVING BEEN INCURRED ON ACCOUNT OF NON-RECOVE RY OF SUCH DUES FROM THE SUBSEQUENT BUYERS, IT WAS RELATED TO THE B USINESS OF THE ASSESSEE. IT WAS DEDUCTIBLE AS BUSINESS LOSS. 9.1. THE HON'BLE SUPREME COURT IN THE CASE OF T.A. QUERESHI VS. CIT (2006) 287 ITR 547 (SC) HELD AS UNDER:- REVERSING THE DECISION OF THE HIGH COURT, (I) THAT THE EXPLANATION TO SECTION 37 HAD NO RELEVANCE AS THIS WAS NOT A CA SE OF BUSINESS EXPENDITURE BUT WAS ONE OF BUSINESS LOSS. BUSINES S LOSS WAS ALLOWABLE ON ORDINARY COMMERCIAL PRINCIPLES IN COMP UTING THE PROFITS. ONCE IT WAS FOUND THAT THE HEROIN SEIZED FORMED PART OF THE STOCK-IN-TRADE OF THE ASSESSEE, IT FOLLOWED THAT T HE SEIZURE AND CONFISCATION OF SUCH STOCK-IN-TRADE HAD TO BE ALLOW ED AS A BUSINESS LOSS. 9.2. THE ITAT AHMEDABAD BENCH A IN THE CASE OF AC IT VS. H. NYALCHAND FINANCIAL SERVICES LTD. & OTHERS (ITA NO. 2631/AHD/2004-BY REVENUE AND CO NO.268/AHD/2004-BY ASSESSEE FOR ASSE SSMENT YEAR ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 10 - 2001-02 & OTHERS) CONSIDERED THE IDENTICAL ISSUE OF THE TRADING LOSS AND DISMISSED THE DEPARTMENTAL APPEAL. COPY OF THE OR DER IS PLACED ON RECORD. IN THIS CASE, THE LEARNED CIT(APPEALS) AL LOWED THE LOSS CLAIMED BY THE ASSESSEE AS TRADING LOSS AND THE ASSESSEE RE LIED UPON ANOTHER DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF PAARKER SECURITIES LTD. (ITA NO.752/AHD/20904 AND ITA NO.340/AHD/2006) . THE TRIBUNAL CONSIDERING THE UNDISPUTED FACT NOTED THAT THE ASSE SSEE INITIALLY CLAIMED THE AMOUNT IN QUESTION AS BAD DEBT AND SUBSEQUENTLY CLAIMED IT AS A LOSS INCIDENTAL TO BUSINESS. THE ASSESSEE CLAIMED DEDU CTION OF THE SAME. THE TRIBUNAL NOTED THAT THERE IS A LOSS ARISEN DURING T HE ASSESSMENT YEAR IN QUESTION AND CONSIDERING ITS EARLIER DECISION OF TH E TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE LEARNED CIT(APPEALS) HAS RIGHTLY ALLOWED THE DEDUCTION ON ACCOUNT OF BUS INESS LOSS U/S.28(1) OF THE I.T. ACT, 1961. THE DEPARTMENTAL APPEAL WAS AC CORDINGLY DISMISSED. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEV ER, RELIED UPON THE DECISION OF HON'BLE MADRAS HIGH COURT IN T HE CASE OF PALANI ANDAVAR MILLS LTD. VS. CIT (SUPRA) IN WHICH NATURE OF THE PAYMENT WAS LOAN AND ADVANCES TO THE EMPLOYEES AND THE ASSESSEE DID NOT INCUR ANY EXPENDITURE. THE CLAIM FOR WRITE OFF WAS NOT AL LOWED AS IT WAS NOT ITA NO .2949/AJD2006 PARLIGHT SECURITIES LTD. VS. ACIT ASST.YEAR 2003-04 - 11 - ALLOWED IN TRADING TRANSACTION. THE ABOVE DECISION THUS WOULD NOT SUPPORT THE CONTENTION OF THE LD.DR. CONSIDERING THE FAC TS AND CIRCUMSTANCES NOTED ABOVE, IT IS CLEAR THAT ASSESSEE SUFFERED A B USINESS LOSS ON ACCOUNT OF NON-REFUND OF SECURITY AMOUNT. ASSESSEE IS ENTITL ED FOR DEDUCTION ON ACCOUNT BUSINESS LOSS. WE ACCORDINGLY SET ASIDE TH E ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 05 /02 /2010 SD/- SD/- ( D.C. AGRAWAL ) ( BHAV NESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/ 02 /2010 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VII, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD