9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (9) TMI 301 - AT - Income TaxLoss of security deposit - business loss or bad debts - Capital or Revenue expenditure - conditions specified u/s 36(2) r.w.s.36(i)(vii) - whether the loss of security deposit in question is a business loss in the revenue field - Held that - the above loss is a business loss ;for the reason that the assessee has taken on lease many premises spread over many parts of the country, and this act of taking this show room on lease is in the normal course of business. In fact 84 show rooms are taken on lease at various places. Six months rent was given as security deposit. This was given in the course of business. The transaction is intimately connected with the business of the assessee - There is no enduring benefit to the assessee. The loss in question is in the revenue field and has been rightly claimed u/s 28. This is not a bad debt. - It is a deposit in the usual course of taking show rooms on lease. - Following decision of Empire Jute Co.Ltd. vs. CIT 1980 (5) TMI 1 - SUPREME Court - Decided in favour of assessee.
Issues Involved:
1. Depreciation on intangible assets. 2. Disallowance of security deposits written off. 3. Disallowance under Section 14A. 4. Treatment of repair and maintenance expenses as capital expenditure. Detailed Analysis: 1. Depreciation on Intangible Assets: The First Appellate Authority observed that the issue of allowability of depreciation on intangible assets was pending for the Assessment Year 2007-08 and did not adjudicate it. The Tribunal decided to set aside the issue to the Assessing Officer (AO) for de-novo disposal in accordance with the law after considering the decision for the Assessment Year 2007-08. This ground was allowed for statistical purposes. 2. Disallowance of Security Deposits Written Off: The assessee claimed a write-off of debit balances, including advance rent and security deposits, which were disallowed by the AO on the grounds that they were capital in nature. The Tribunal considered the following specific cases: a. Ghaziabad Real Estate Pvt. Ltd.: The assessee paid Rs. 21,10,400/- as advance rent and security deposit for a lease agreement that was not finalized. The Tribunal held that the loss was a business loss in the revenue field, as the transaction was intimately connected with the business of the assessee. The claim was allowed under Section 28. b. KB Mall Management: The security deposit of Rs. 1,40,250/- was forfeited when the assessee terminated the lease agreement. The Tribunal allowed this claim as a business loss for the same reasons as above. c. Other Small Payments: The Tribunal allowed the claims for Rs. 12,965/- (double payment to suppliers, excess ESI payment, and security deposit for telephone) and Rs. 2,76,746/- (small outstanding balances from customers written off) as business losses. 3. Disallowance under Section 14A: The First Appellate Authority directed the AO to work out the disallowance under Section 14A in line with the decision of the Hon'ble Delhi High Court in the case of Maxopp vs. CIT. The Tribunal set aside the issue to the AO for de novo adjudication in accordance with the law. 4. Treatment of Repair and Maintenance Expenses as Capital Expenditure: The AO made an adhoc disallowance of Rs. 2 crores from the total expenditure of Rs. 6,87,88,884/- claimed by the assessee, treating it as capital expenditure. The First Appellate Authority found the AO's estimation unjustified and held that the expenditure was in the nature of revenue expenses required for the day-to-day conduct of the business. The Tribunal upheld the First Appellate Authority's decision, dismissing the Revenue's appeal on this ground. Conclusion: The Tribunal allowed the assessee's appeal in part, specifically allowing the claims for write-offs of security deposits and other small payments as business losses. The issues of depreciation on intangible assets and disallowance under Section 14A were set aside to the AO for re-evaluation. The Revenue's appeal was dismissed, upholding the First Appellate Authority's decision on the treatment of repair and maintenance expenses. The order was pronounced in the open court on 28th June 2013.
|
