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TMI Blog2018 (9) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... oss as the premises was taken on rent for the purpose of business. The facts in the case of Triveni Engg. Industries Ltd. (2010 (9) TMI 26 - DELHI HIGH COURT) were that the company was amalgamated and in the amalgamated company, advances given for securing the premises could not be recovered. Therefore, the unrecovered advances of rent was not allowed as revenue in nature. But, in the given case, it was recovered and settled for the rent for lock in period. Therefore, it is distinguishable on facts to the case of the assessee. Hence, the grounds raised by the assessee are allowed. - ITA No. 1764/Hyd/2017 - - - Dated:- 19-9-2018 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he security deposit was given by the assessee in terms of the lease deed and was for the purposes of taking the premises on lease. The fact that the lease has been cancelled does not change the nature and purpose for which the deposit was given it will still be treated as intimately connected with smooth operations of Assessee Company. The assessee further stated that it was wrongly described the transaction as write-off of the security deposit, however, in substance, it was only a manner of settlement of rent payable by the assessee towards unexpired lock-in-period of lease and incidental to business of the assessee. 2.2 The Assessing Officer not accepted the assessee's submissions. The Assessing Officer concluded that the security ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Lock-in-period of 4 years and 6 months as defined in Lease deed. The assessee submitted that M/s. Finest Promoters Pvt ltd has to pay ₹ 10,28,43,755/- towards rent for the unexpired period of lock-in-period i.e., 35 months. The assessee submitted that it negotiated with M/s. Finest Promoters pvt. ltd to waive off the said minimum lease payment. After negotiations with landlord to reduce the rent payable for lock-in-period and it was agreed among the parties that appropriation of Security deposit against the minimum receivable by landlord would be made for negotiated amount instead of cash payment by the assessee and security deposit appropriation was agreed as follows: Month of commencement of rent by new ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o M/s. Finest Promoters Pvt ltd and its subsequent appropriation. The assessee also submitted that the right to use the premises was for limited period which was restricted to the carrying out the activities related to its insurance business as permitted by its Memorandum and Articles of Association. The assessee submitted that appropriation of security deposit against minimum rent payable as per lease agreement terms is business expenses and is revenue in nature. The assessee submitted that appropriation of security amount against negotiated minimum lease rent is business expenses and revenue in nature and admissible expenses u/s.37 of the Income Tax Act, 1961. 4.2 The assessee submitted the following documents: 1. Certificate of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there is a factual error in the findings of the AO and CIT(A) that when the assessee had paid rent for the remaining period of lock-in-period and appropriated that rent from security deposit towards and claimed as revenue expenditure, and the finding of the AO and CIT(A) is on the subject that rent security written off. He relied on the following case law: 1. United Motors (India) Ltd. Vs. ITO, 6 Taxmann.com 32 (Mum.). 2 IBM World Trade Corporation Vs. CIT (Bombay HC), [1990] 48 Taxman 11 wherein it was held as under: 3. CIT Vs. Mysore Sugar Co. Ltd., [1962] 46 TR 649 (SC), 4. CIT Vs. Mahalakshmi Textile Mills Ltd., [1967] 66 ITR 710 (SC), 5. CIT Vs. Khaitan Chemicals and Fertilizers Ltd., [2010] 326 ITR 114 (Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that the moneys advanced by the assessee in pursuance of these agreements to the landlord for the purposes of and in connection with the acquisition of the premises on lease were for the purpose of business. Naturally, therefore, when such advances are lost to the assessee, the loss would be a business loss and not a capital loss. The decisions relied upon by Dr. Balsubramanian, according to us, have no bearing on the question involved herein. In the supreme Court decision, the question was of third party's liability to pay estate duty and the discharge by an assessee. It was obviously a purpose unconnected with the business of the assessee. The other two decisions, viz., Uttar Bharat Exchange Ltd.'s case(supra) and Taj Mahal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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