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TMI Blog2016 (8) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO. Thus, we directed the AO to delete the disallowance - Decided in favour of assessee. - ITA No.6484/Mum/2014 - - - Dated:- 22-6-2016 - SHRI B.R. BASKARAN, AM AND C.N. PRASAD, JM For The Appellant : Shri Sanjay Sawant For The Respondent : Shri Satya Pal Kumar ORDER PER C.N.PRASAD, JUDICIAL MEMBER : The present appeal is filed by the Assessee against the order of Commissioner of Income Tax-12, Mumbai dated 22-08-2014 for assessment year 2010-11. 2. The only issue in the appeal of the assessee is that the ld. CIT(A) erred in confirming addition of ₹ 43,00,040/- made by the assessing officer considering sundry balances written off as falling outside the purview of section 36(2) r.w.s.36(1)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoid penal action. Assessee contended that the lessor completely ignored its application and various warnings from the fire department which was brought to their notice and with the result assessee had to show that the lessor did not comply with various clauses of the terms and conditions of the lease deed. It was also contended that assessee has terminated the lease and demanded compensation of ₹ 3.56 crores form the lessor. The asessee contended that the deposit written off should be allowed as revenue expenditure. It was further contended that security deposit was adjusted against the outstanding rent and other charges therefore should be allowed. Further the assessing officer disallowed the right off of security deposit holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. Some of the outlets closed its operations and transferred the stock and fixed assets to other outlets. At some of the outlets the assessee collected the refundable deposit. But however the developer at Paladi, Ahmedabad branch did not refund the deposit, in spite of writing various letters to them. After continuous follow up with the developer for refund of the said deposit the assessee decided to invoke Clause No.2 of page 3 of the Lease Deed relating to adjustment of the deposit against outstanding rent, taxes, etc. In this connection, counsel submit, that the A.O. has made addition of ₹ 43,01,040/- considering the same as capital in nature which cannot partake the nature of a revenue expenditure. 4.2 To write-off a deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28th day of July 2009. According to the aforesaid cancellation of Lease Deed, the Lease Deed dated 07.06.2008 executed by the assessee and the lessor was terminated and cancelled by the parties w.e.f. 30.06.2009. As per the terms of agreement on page 3, [item No (2)], the parties had agreed that the amount of security deposit paid by the assessee would be adjusted against the outstanding rent, outstanding taxes, charges, electricity bills, telephone bills and other charges/amounts relating to the said property upto 30.06.2009 and that there would be no outstanding amount to be paid or refunded by either party. A copy of Lease Deed dated 7th June 2008 and Cancellation Deed dated 26th July 2009 will be submitted at the time of hearing. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee that security deposit was adjusted against the outstanding rent and other charges and therefore should be allowed as revenue expenditure. Ld. CIT(A) sustained the disallowance holding that it is not a write off bad debt, not allowable u/s 36(1)(vii) and also not allowable expenditure u/s 37(1) of the Act. We find that the assessee terminated the lease agreement which was entered into by it with the lessor for the reason that assessee could not continue the business in the said premises as the lessee could not comply with the terms and conditions of the lease agreement and also the assessee could not obtain necessary permissions from various Government authorities. Both lessor and the assessee entered into deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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