Law:

Section:

JANUARY 13, 2012 Section 36(1)(vii), read with section 271(1)(c), of the Income-tax Act, 1961 - Bad debts - Assessment year 2000-01 - Assessee deposited certain amount in a company as share application money - In view of non-allotment of shares, assessee converted said amount into loan - However, in absence of any response from company, assessee subsequently wrote off said amount and claimed deduction under section 36(1)(vii) - Assessing Officer rejected assessee's claim and also passed a penalty order under section 271(1)(c) for raising a false claim - Whether since no material was brought by assessee in course of penalty proceedings or even in course of hearing of appeal to show that debt had been taken into account in manner required by section 36(2)(i), it was to be held that particulars furnished by assessee in support of its claim were inaccurate and, thus, impugned penalty order was to be upheld - Held, yes [In favour of revenue] FACTS The assessee-company deposited certain amount in the account of a company namely 'DISL' as share application money. However, no shares were allotted to the assessee. The assessee thus chose to exercise the option of converting the share application money into loan. This option was exercised by writing a letter to DISL stating that since the shares were not allotted, the assessee was exercising its option to convert the share application money into a loan bearing interest at the rate of 22 per cent compounded quarterly. However, there was no response from DISL. The assessee subsequently wrote off said amount and claimed deduction in respect of same as bad debt. The assessee further claimed that if bad debt was not allowable, the deduction might be allowed under section 28 itself or as a capital loss under section 45, as assessee was not allotted shares against the application money. The Assessing Officer rejected the main claim as well as the alternative claim on ground that assessee was not in the business of buying and selling of shares and the shares were acquired only as an investment. Therefore, the loss of investment was not a revenue loss. He also did not accept the assessee's alternative plea that the loss was…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492