income calculation for share broker
This query is : Resolved
11 November 2009
Wether share broker can claim bad debts as expenses in his income while computing taxable incom ?
11 November 2009
Yes he can. For tax purposes it is better to build up back up papers to convince the AO on the genuiness of the claim.
11 November 2009
yes and there is a case law relating to this is below
CIT vs. Bonanza Portfolio (Delhi High Court)
The assessee, a share broker, purchased shares on behalf of its client and paid for them. The brokerage on the said transaction was offered to tax. As the client did not pay for the shares, the assessee wrote off the amount due and claimed the same as a bad debt u/s 36 (1) (vii). The AO rejected the claim on the ground that as the said “debt†had not “been taken into account in computing the incomeâ€, the conditions of s. 36 (2) (i) were not satisfied. This was confirmed by the CIT (A). On appeal, the Tribunal upheld the claim on the ground that s. 36 (2) (i) required “such debt or part thereof†to be taken into account in computing the income and as the brokerage had been offered to tax, s. 36 (2) (i) was satisfied. On appeal by the Revenue, HELD dismissing the appeal:
(i) The assessee being a broker, the fact that it paid for the shares did not make it an “investment†for the assessee. The transaction was one of brokerage on purchase / sale on behalf of the client;
(ii) The money receivable from the client for the said shares was a “debt†and since it became bad, it was rightly treated as a “bad debtâ€;
(iii) Since the brokerage payable by the client was a part of the debt and that debt had been taken into account in computing the income, the conditions of s. 36 (2) (i) read with s. 36 (1) (viii) were satisfied and the entire bad debt was allowable as a deduction.
Note: See also CIT vs. DB (India) Securities (Delhi High Court) where the same view was taken.
CIT vs. Bonanza Portfolio (Delhi High Court)
The assessee, a share broker, purchased shares on behalf of its client and paid for them. The brokerage on the said transaction was offered to tax. As the client did not pay for the shares, the assessee wrote off the amount due and claimed the same as a bad debt u/s 36 (1) (vii). The AO rejected the claim on the ground that as the said “debt†had not “been taken into account in computing the incomeâ€, the conditions of s. 36 (2) (i) were not satisfied. This was confirmed by the CIT (A). On appeal, the Tribunal upheld the claim on the ground that s. 36 (2) (i) required “such debt or part thereof†to be taken into account in computing the income and as the brokerage had been offered to tax, s. 36 (2) (i) was satisfied. On appeal by the Revenue, HELD dismissing the appeal:
(i) The assessee being a broker, the fact that it paid for the shares did not make it an “investment†for the assessee. The transaction was one of brokerage on purchase / sale on behalf of the client;
(ii) The money receivable from the client for the said shares was a “debt†and since it became bad, it was rightly treated as a “bad debtâ€;
(iii) Since the brokerage payable by the client was a part of the debt and that debt had been taken into account in computing the income, the conditions of s. 36 (2) (i) read with s. 36 (1) (viii) were satisfied and the entire bad debt was allowable as a deduction.
Note: See also CIT vs. DB (India) Securities (Delhi High Court) where the same view was taken.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is this income indian or foreign income?
- ITC temporary reversal and reclaim
- GST on export of services and Input Credit
- RCM applicability on Rent Paid by Registered Person to Unregistered Landlord for Residental Building
- Inventory of finished goods
- Applicable TDS rate for sale of property in Nov 2024
- Sale of property furniture sale
- Can we claim ITC of Feb-2024 in the month of November-2024 which was not claimed by oversight
- REGARDING 25 AS DATE OF PAYMENT AND DATE OF BOOKING
- Tds on building rent monthly
- Regarding Waiver of Interest levied u/s 50 of PGST/CGST Act
- LAST YEAR 2022-23 ITC IN NEXT YEAR 2023-24 REPORITNG IN GSTR-9
- MIS MATCH OF INVOICE NUMBER
- IGST Credit-Show cause notice issued-confusion
- Issue of gst e invoice
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding einvoice taken on nil rated sales
Trending Online Classes
CAclubindia
