COMMISSIONER OF INCOME TAX Vs. BONANZA PORTFOLIO LTD

JUDGEMENT

(1.) ADMIT .

(2.) FOLLOWING question of law arises for consideration: Whether in view of the provisions of Section 36(1)(vii), the total debit balance including the consideration collectible by the assessee company for the sale/purchase of shares can be claimed by the assessee as bad debts when the assessee company had only credited brokerage in the P&L; a/c

(3.) IN the IT return filed by the assessee for the asst. yr. 2001 -02 the assessee declared income of Rs. 33,25,404. This return was processed under Section 143(1) of the IT Act. Statutory notice under Section 143(2) of the Act was given and the assessment completed under Section 143(3) of the year. During the assessment AO found that the assessee had claimed bad debt in the sum of Rs. 50,30,491. According to the AO, conditions for allowability of this amount as bad debt as stipulated in Section 36(1)(vii) of the IT Act r/w Section 36(2) thereof were not satisfied and, therefore, he disallowed the said claim of bad debt. The order of the AO was confirmed in appeal by the CIT(A). However, in further appeal preferred by the assessee before the Tribunal, the Tribunal has allowed the appeal and held that aforesaid amount should have been allowed as bad debt by the AO as conditions stipulated in Section 36(1)(vii) and Section 36(2) have been satisfied. Against the order of the Tribunal the present appeal is preferred by the Revenue.