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TMI Blog2018 (7) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... law and against the facts and circumstances of the case. 3. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 2. Briefly stated facts of the case are that the assessee file return of income on 27/09/2011, declaring loss of Rs. 48,84,022/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short 'the Act') was issued and complied with. During scrutiny proceedings, in respect of sundry balances written off of Rs. 26,93,019/-, the assessee explained that same relate to security deposit forfeited by the landlords at various premises which were taken on lease by the assessee. The Assessing Officer observed that the assessee submitted a list of 38 such premises alongwith name of the landlords, but no supporting documents to justify the claim made by the assessee, were filed by the assessee. According to the Assessing Officer, writing off of security deposit of 38 landlords in a single year was unexplainable and suspicious as normally the tenant is at liberty to adjust the security deposit against last m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as a business loss which is allowable as per provisions of Section 37(1) of the Act. He has relied on a number of case laws to support his contention. Facts in most of the case laws are distinguishable as the forfeiture of deposits in those cases arose out of non fulfillment of contract obligations or breach of commitment. In the case on hand, the appellant has not provided any evidence about the efforts made to recover the security deposit from the landlords. In appellate proceedings, the Ld. AR was requested to file details, evidence to substantiate its contention that efforts had been made to obtain the refunds. The Ld. AR expressed his inability to furnish any evidence to this effect. In any case, the amounts written off cannot be treated as a business loss, as the same is in the nature of capital loss. The Hon'ble High Court of Delhi in the case of CIT vs. Triveni Engineering Industries Ltd. in ITA No.56 of 2009 in dated 14.09.2010 held as under: ................................................................................... 15. Coming to the security deposit written off by the assessee, the moot question is as to whether the advances were given for securin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s advantage and was acquiring the business asset in the context of specific Clause in the lease deed. Therefore, the property was not treated as that of the lessor. Further, the Supreme Court found that by incurring the expenditure of this nature, the assessee had taken the advantage in the form of reduced rent for a much longer period. This judgment is, thus, not applicable in the present context. 5.7. Adverting to the facts in the present appeal, it is noted from the lease agreements that the appellant has paid the impugned amount(s) as refundable interest free security deposit. These deposits were given for obtaining the premises on rent and thus, the appellant had obtained a right to use the property, i.e., tenancy right, which is a capital asset. In view thereof and in the light of judicial pronouncement reproduced above, writing off of the impugned security deposits claimed by the appellant as a business loss is not allowable as the same is in the capital field and not allowable as a revenue expenditure as per section 37(1) of the Act. The action of the AO in disallowing the claim of write off of security deposit of Rs. 26,93,019/- is therefore, upheld and the addition is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many premised spread over many part of the country, and this act of taking this show room on lease is in the normal course of business. In fact 84 show rooms are taken on lease at various places. Six months rent was given as security deposit. This was given in the course of business. The transaction is intimately connected with the business of the assessee. The Assessing Officer has not disputed the genuineness of the claim. The CIT(A) has disallowed the amount on the ground that the loss was in the capital field. We do not agree with this finding. There is no enduring benefit to the assessee. In our view the loss in question is in the revenue field and has been rightly claimed u/s 28. This is not a bad debt. It is not a case where "lease premium" is paid for a long term lease as in the case of Kribco (supra). It is a deposit in the usual course of taking show rooms on lease. 7. Similarly, the Tribunal in the case of Social Media India (supra) observed as under: "11. We have considered the rival contentions and perused the orders of the CIT(A). Following the principles relied upon in earlier ground, Ld. CIT(A) in this case also held that advances are not revenue expenses and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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