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TMI Blog2015 (12) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and to be incidental to it. If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act. It is clear that this advance payment was not for the normal course of business/trade. Since the capital asset is created, the same cannot be treated as revenue loss but capital loss. - In the other cases raised by assessee, the bad debts arose in the normal course of business and are revenue in nature, but, in the present case, advance written off was in the nature of capital asset - Decided against assessee. ‘Other income’ not considered for allowing deduction u/s 80IB - Held that:- The assessee is eligible to claim income from scrap sales. The scrap is part and parcel of any industrial undertaking, without which, there is no manufacturing activity. Hence, entitled to claim benefit u/s 80IB. Coming to the income from insurance, the undertaking claimed loss from insurance company, it is nothing but compensation for the finished goods lost after manufacturing in the undertaking and during transit. It is similar to the scrap sales income derived as part of the industrial process. Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80rB of the Income Tax Act , 1961. 5. Your Appellant submits that the CIT (A) as well as the Assessing Officer ought not to have restricted the claim of deduction under sect ion 80IB of the Income Tax Act , 1961, when other income is being derived from the business of the under taking. 3. As regards the issue raised in ground Nos. 1 to 3 regarding disallowance of bad debts claim of ₹ 7,65,028/- relating to rent deposit, the assessee had debited ₹ 7,65,028/- towards non-recovery of rent deposit. Subsequently, in reply to AO s enquiry, Assessee submitted a copy of the ledger account along with a copy of letter dated 20/02/08 addressed by it to M/s Chettipunyam Properties P. Ltd. requesting them to return the security deposit. The AO observed that the assessee had only written a letter in the last week of February, 2008 and the amount was written off in the month of March, 2008. He noted that as per the letter dated 20/02/08, Sri K. V. Sooriya Narayanan President (Corporate) and Company secretary, had called upon the said party to pay the balance security of ₹ 8,50,000 within 15 days, failing which legal action may be initiated. The AO observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to their sister concerns. Ld. AR submitted that this lease was taken only for the purpose of business and paid rent for the same claiming it as revenue expenditure. It does not create any capital asset since the lease was conditional as enumerated from clause f (supra) of the agreement. Hence, it does not form any capital asset. . He relied on the following judgments: 1. LG Soft India (P) Ltd., Vs. DCIT, 35 taxmann.com 202 (Bang.) 2. ACIT Vs. Appollo tyres Ltd., 33 taxmann.com 575 3. United Motors (India) Ltd. Vs. ITO, 6 taxmann.com 32 (Mum.) 4. Kanoria Securities Financial Services (P) Ltd., Vs. ACIT, (Mum.) 15 SOT 191 5. Badridas Daga Vs. CIT 34 ITR 10 (SC) 8. The ld. DR, on the other hand, relied upon the orders of AO as well as relied on the decision of the Hon ble Delhi High Court in the case of Triveni Engg. Industries Ltd. (supra) and the order of CIT(A). He submitted that the property taken on lease gives right of occupancy exclusively and thereby creates a capital asset, hence, writing off such advance as non-recoverable amounts to capital loss. 9. We have heard the arguments of both the parties and perused the material on record a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of business and are revenue in nature, but, in the present case, advance written off was in the nature of capital asset. . Accordingly, ground Nos. 1, 2 3 are dismissed. 10. As regards the second issue claim of deduction u/s 80IB raised in ground Nos. 4 5, the AO noticed that while calculating the profits eligible for deduction u/s 80IB, the assessee had considered the other income of ₹ 22,56,743/- as eligible income u/s 80IB also. He opined that since such other income was not derived from the business of the assessee, the same was not eligible for claim of deduction u/s 80IB. The assessee contended that the other income was generated out of normal course of business. However, the AO did not accept the said contention opining that in view of various court pronouncements, other income is not to be considered as derived from the business. Accordingly, he computed the deduction u/s 80IB at ₹ 2,53,07,225 as against ₹ 2,59,84,248 claimed by the assessee and disallowed the excess claim of ₹ 6,77,023. 11. Before the CIT(A), it was submitted by assessee that the other income constituted receipt from sale of scrap, broken/damaged sheets, gunnies etc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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