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
- Reopen of assessment proceeding
- Is any professional CA is here please reply
- EPF FULL & FINAL RULES IN 2026
- EXPORT BILL UNDER LUT FREIGHT CHARGE INCLUED IN INVOICE IT LIABLE TO TAX
- Reprocessing of rectification order AY 2025-26
- FTS Taxable under 115A
- Rental income gst and it purpose
- Foreign lottery ticket bought online from India: legality, tax and consequences
- Putting a heading on received mail
- COMMERCIAL INVOICE FOR MATERIAL AND FREIGHT
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
