9911796707
TMI Blog2013 (5) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,47,489/- which was paid as an advance rent by the assessee and had been written off as not recoverable in the previous year relevant to the assessment year 2004-2005. 2. The assessee is, inter alia, engaged in the business of dealing and servicing motor vehicles and had taken certain property on lease from three landowners (hereinafter referred to as "the lessors") for a period of three years renewable for two further periods of 3 years each. The property consisted of a plot of land whereupon the lessors were required to build a warehouse cum workshop and hand over the same to the assessee. In this regard, the assessee advanced certain sums to the lessors which were liable to be adjusted against monthly rent. The monthly rent for the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Accordingly, the Assessing Officer passed an assessment order dated 30.11.2006 inter-alia disallowing the amount written off by the assesse as irrecoverable and adding a sum of Rs 64,60,707/- to the income of the assessee. It is relevant to state that the genuineness of the expenditure was not doubted by the Assessing Officer and the Assessing Officer disallowed the amount written off on the ground that the amount incurred by the assesse was on development and improvement of the leasehold property and was of an enduring nature and thus could not be considered as revenue expenditure. The Assessing Officer held that in view of the explanation to Section 32(1) of the Act, capital expenditure incurred by an assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance amount of Rs 33,47,489/- was upheld by CIT (Appeals) not on the ground that the same was a capital expenditure but on basis that the same could not be allowed as a revenue loss as the assessee had filed a civil suit for recovery of that amount and the same was being pursued. The CIT (Appeals) held that as the assessee was pursuing its remedies before a Court by way of a civil suit for recovery of the amounts advanced to the lessors, it could not be held that the amounts had become bad debts. The relevant portion of the order passed by the CIT (Appeals) is quoted below:- "8.5.5. It is noticed that the amount disallowed by the AO as loans and advances was Rs 64,60,707/-, under explanation to section 32(1) of the Act and after dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is only Rs 34,800/- of advance rent adjusted till the demolition of building." 6. The revenue accepted this order and did not file an appeal before the Income Tax Appellate Tribunal. However, the assessee preferred an appeal from the decision of the CIT (Appeals). The Tribunal upheld the decision of the Assessing Officer and the CIT (Appeals) with regard to the amount of Rs 30,78,418/- spent by the assessee on the workshop as capital expenditure but granted relief to the assessee with regard to the addition made by the Assessing Officer in respect of the advance rent of Rs 33,82,289/- which had been written off by the assessee, in his profit and loss account, as irrecoverable. 7. Following the decision of the Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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