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2014 (7) TMI 677 - AT - Income TaxPenalty u/s 271(1)(c) of the Act - Loans and advances written off – Held that:- The payment was for protecting the business and not for curing the defect in the title of property - If the assessee had incurred this amount of ₹ 22.84 lakhs on curing the title of the property, the amount would certainly have assumed the character of a capital expenditure not eligible for deduction requiring imposition of penalty - the amount cannot be outrightly characterised as capital expenditure, ineligible for deduction – Relying upon Minoo F Mehta vs. CIT [1994 (12) TMI 9 - BOMBAY High Court] - If it is incurred by the assessee for the purpose of creating, curing or completing his title to capital, it must be regarded as capital expenditure - But, if it is for the purpose of protecting its business, it would be considered as revenue expenditure - whereas an expenditure incurred for creating, curing or completing title to the property is capital, any sum incurred to protect the business is revenue expenditure. Claim of the assessee for deduction of such expenses is neither barred by any direct judicial precedents nor is contrary to any specific statutory provision - the question as to whether deduction should be allowed for such write off falls in the realm of debate - the assessee kept on keeping this amount under the head ‘Loans and advances’ in its balance sheets over the period with the hope of getting reimbursement from the seller of property - But for such chances of recovery to be effected from the seller, the assessee would have claimed deduction for the same on year to year basis, which might possibly have been allowed also - mere fact that the assessee lost the hope of recovering this amount and wrote it off in its books of account, can by no standard be considered as a case of concealment of income or furnishing of inaccurate particulars of income – thus, the order of the CIT(A) is set aside – Decided in favour of Assessee.
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