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2010 (9) TMI 26 - HC - Income TaxUnrealized assets written off – loss of 12.58 crores – security deposit written off – advance given to various employees were written off – AO disallowed written off - The reason for denying these deductions given by the AO was that security deposits and employees balance written off did not spring directly from carrying on of the business and were not incidental thereto, though it was admitted that the same may have some connection with the business. – CIT(A) and ITAT allowed the deduction – Held that: - Insofar as deduction of advances given to the employees are concerned, which had become unrecoverable, that may not pose much of a problem. Advances were given to the persons who had been employed by the assessee-company and if they became unrecoverable, it would clearly be treated as business loss. – Security deposits were not in the form of rent. The question would be when such a security deposit has become non-recoverable for some reasons whether it can be allowable as deduction under Section 28 of the Act. The deposits were not given in the ordinary course of business either. These were given for securing the premises on rent; albeit for the purpose of carrying on business therein. - the amount of ₹ 15,34,951/- (towards security) was not a revenue loss, and therefore not allowable as deduction.
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