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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI AMARJIT SINGH
O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the Revenue is directed against the order of the Ld. CIT(A)-18, Mumbai dated 31.08.2012 pertaining to Assessment year 2009-10.
The sole grievance of the Revenue is that the Ld. CIT(A) erred in deleting the disallowance of Rs. 93,62,085/- being deposits written off.
The assessee is in the business of running organized retailing of household consumables and running supermarket and stores. The return for the year was filed on 29.9.2009 declaring loss of Rs. 19,95,99,724/-. The return was selected for scrutiny assessment through CASS. While scrutinizing the statement of income, the Assessing Officer found that the assessee has debited an amount of Rs. 93,62,085/- on account of deposit for premises written-off. The AO further noticed that the said amount was suo- motu disallowed by the assessee in its computation of income and subsequently the said amount was reduced for computing income. The AO was of the firm belief that the deposits were given by the assessee for the purpose of obtaining premises therefore the loss suffered on non- recovery of the same is capital in nature. The AO added back Rs. 93,62,085/- to the total income of the assessee.
The assessee carried the matter before the Ld. CIT(A) and explained that the deposits were given during the course of business and for the purpose of business therefore the same are allowable as write off as a business loss. After considering the facts and the submissions and drawing support from the decision of the Hon’ble Jammu & Kashmir High Court in the case of Chenab Foresh Co. Vs CIT 96 ITR 568 and also following the ratio laid down by Hon’ble High Court of Bombay in the case CIT Vs Dempo & Co. Ltd 206 ITR 291, the Ld. CIT(A) was convinced that the write off of deposits is a business loss and directed the AO to delete the addition.
Aggrieved by this, the Revenue is before us.
The Ld. Departmental Representative strongly supported the findings of the AO.
The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The Ld. Counsel also relied upon the decision of the Hon’ble High Court of Bombay in the case of I.B.M. World Trade Corpn. Vs CIT 186 ITR 412.
We have given a thoughtful consideration to the orders of the authorities below in the light of the rival submissions made by the representatives. There is no dispute that the deposits were given during the course of the business of the assessee. It is also an undisputed fact that the same became irrecoverable and were therefore written off. The assessee claimed the amount as a business loss which was disallowed by the AO and the said disallowance was deleted by the First Appellate Authority.
8.1. It would be relevant to consider the observations made by the Hon’ble Supreme Court in the case of CIT Vs Mysore Sugar Co. Ltd 46 ITR 649 which read as under:
“To find out whether an expenditure is on the capital account or on revenue, one must consider the expenditure in relation to the business. Since all payments reduce capital in the ultimate analysis, one is apt to consider a loss as amounting to a loss of capital. But this is not true of all losses, because loosed in the running of the business cannot be said to be of capital. The questions to consider in this connection are: for what was the money laid out? Was it to “ acquire an asset of an enduring nature for the benefit of the business, or was it an outgoing in the doing of the business? If money be lost in the first circumstance, it is a loss of capital, but if lost in the second circumstance, it is a revenue loss. In the first, it bears the character of an investment, but in the second, to use a commonly understood phrase, it bears the character of current expenses.”
8.2. This observation of the Hon’ble Supreme Court was considered by the Hon’ble High Court of Bombay in the case of I.B. M World Trade Corpn. (supra). The relevant observation of the Hon’ble High Court of Bombay in the case of I.B. M World Trade Corpn.(supra) read as under: “As the acquisition of premises on lease would not ordinarily be in the capital filed, we have no hesitation in holding 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 ssessee, the loss would be a business loss and not a capital loss.”
Respectfully following the decisions referred to hereinabove, on identical set of facts, we confirm the findings of the Ld. CIT(A) and decline to interfere.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 21st October, 2015