Share brokers are eligible to claim bad debts as expense

SUMMARY OF CASE LAW The assessee, a broker, purchased shares of the value of Rs.1,06,10,247 on behalf of its sub-broker. The sub-broker made payment of Rs.64 lakhs. As the remaining amount of Rs.41,37,881 was not paid, the assessee did not deliver those shares to the client though it offered the brokerage to tax. Since the balance payment was not made even in the next year, the assessee claimed deduction of Rs. 41,37,881 as a “bad debt” u/s 36 (1) (vii). The Tribunal allowed the claim. On appeal by the Revenue to the High Court HELD: (i) The contention of the Revenue that the said amount w...