Bad Debts Treatment

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MANISH KAPOOR (Querist)
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08 February 2010 We are a Share Trading Company and we Purchase and Sell Shares on behalf of our customers.
In case of two of our customers we suffered heavy losses when the markets crashed in 2009, and finally after settlement in court they paid us 20 % of the amount which were due to us.
Can we treat the debit balance of the remaining 80% as bad debts for income tax purposes.
How.........

CA Amit Kumar Hallen

CA Amit Kumar Hallen (Expert)
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08 February 2010 Yes you can clain the 80% amount as bad debt

CA Prashant Gupta

CA Prashant Gupta (Expert)
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08 February 2010 for bad debts condition is you should have treated that amount as income in previous years except in case of money lending or banking business.
In your case have you shown it as income in previous years if not I doubt you can claim bad debts for it.

CA Amit Kumar Hallen

CA Amit Kumar Hallen (Expert)
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08 February 2010 i would like to clear one thing that here there is share trading and the income is only brokerage and it is in the nature of loan or finance and hence bad debt will be allowed

MANISH KAPOOR

MANISH KAPOOR (Querist)
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08 February 2010 In this case we were trading on behalf of customers (as sub broker) so we had to pay the broker from our own pocket and the client is standing as a debtor in our books.

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