TMI Blog2018 (7) TMI 1552X X X X Extracts X X X X X X X X Extracts X X X X ..... ude that assessee’s impugned claim is rather allowable as a business loss u/s 28 r.w.s 37 - We accordingly delete the impugned disallowance. Disallowance of earnest money deposit as no longer recoverable - Held that:- DR fails to dispute the basic fact that the assessee has actually written off the impugned in question in respect of its deposits for participating tenders processes in different organizations recoverable. The CIT(A) has also found “perceptible evidence” in assessee’s favour. His only view that it is not clear as to whether the said amount is in capital or revenue account. We find no merit in such reasoning. The fact remains that the assessee has made the impugned deposits so as to carry out its routine business activity of taking part in tender process. We therefore conclude the same to be revenue expenditure allowable in the nature of business loss u/s 28 r.w.s 37 of the Act since incidental to its core business activity of tenders. The assessee succeeds in its second substantive ground as well. TDS u/s 194C - TDS liability - Held that:- Both the lower authorities are of the view that the assessee ought to have deducted TDS as the impugned expenditure pertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed in case No.1873/CIT(A)-4/Circle- 10(2)/Kol/14-15 in scrutiny assessment proceedings. 2. We proceed assessment year-wise for the sake of convenience and brevity. Assessment Year: 2011-12 ( Assessee s appeal ITA No.2220/Kol/2016) 3. The assessee s first substantive ground pleads that both the lower authorities have erred in law as well as on facts in rejecting its Value Added Tax (VAT for short) amounting to ₹2,12,100/- written off as no longer recoverable claimed as a deduction. Both the Learned representatives take us to CIT(A) s corresponding findings in para 3.1 of the order reading as under:- 3.1 I have considered the submission of the AR of the appellant in the matter in the backdrop of the assessment order. I find that the AO has disallowed the sum of ₹2,12,100/- u/s.36(2)(i) of the Act. The AR in his submissions has not disputed the finding of fact by the AO that the sum of VAT was not forming part of income in the profit and loss account in any of the previous assessment ears. In fact, the appellant has submitted that it is maintaining a separate account for VAT, wherein the input and output is entered and the yearend balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. We accordingly delete the impugned disallowance. 5. Next issue in assessee s instant appeal is that of disallowance of earnest money deposit of ₹7,55,500/- as no longer recoverable. The CIT(A) s findings under challenge qua this issue read as under:- 4.1 I have considered the submission of the A of the appellant in the matte. I find that the appellant has claimed a deduction of ₹7,55,500/- in respect of advance (earnest money) written off. Impugned order find from the assessment order that the disallowance is made u/s 36(2) of the Act. The AR before me has claimed the said write off as allowable u/s.28 of the Act, relying upon the case as cited supra. The AR has submitted before me that in the course of normal business activity, the appellant had to participate in various tender processes with different Government organizations for which they had to pay Earnest Money. Some of the sided earnest monies could not be recovered for different reasons and after lapse of reasonable time, the same were written off since chances of recovery of the same became remote. Since those Earnest monies were paid for regular business purpose and for securing business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculations in respect of those figures were not available: 1) Marble Kind Tile Co ₹ 7,63,350/- 2) B Con Group Rs.10,66,312/- 3) Sanjay Agarwal ₹ 2,06,074/- 4) Avidip Enterprise ₹ 8,36,091/- Orders were placed before them for supply as well as for execution of works. In some cases of execution of contract, any requirements of materials are being procured by them from outside independent parties and not supplied by your assessee and they raised invoices separately for supply of materials and for labour when such labour charges are required. As a result in case of supply of materials, stated herein above, taxes have not been deducted at source since these are not cases coming under expression carrying out any work . In other cases taxes were duly deducted. In the Memorandum explaining the provision of Finance Bill, 2009, definition of work in sec 194C has been clarified to the effect that work shall not include manufacturing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Suffice to say, both the lower authorities are of the view that the assessee ought to have deducted TDS as the impugned expenditure pertaining to supply of materials. We quote section 194C Explanation (iv)(e) of the Act in this backdrop to conclude that there is no specific finding in lower authorities orders under challenge that the assessee had, in fact, supplied the necessary material to its payees for manufacture or supply purposes. We therefore conclude that the CIT(A) has erred in law as well as on facts in confirming the impugned disallowance of outright material purchase. The assessee succeeds in third and final substantive ground as well as the main appeal ITA No.2220/Kol/2016. 9. We now come to latter assessment year 2012-13. The Revenue s appeal ITA No. 1793/Kol/2016 raises its former substantive ground challenging correctness of the CIT(A) s action treating assessee s repair expenditure claim on building amounting to ₹1,07,03,835/- as revenue expenditure as follows:- 3. Ground No.1 This ground is directed against the action of the AO in disallowing an amount of ₹1,07,03,835/- on account of repairing expenses of building treating it as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Firstly, the Learned assessing authority erred in concluding that no repairing expenses are allowable on rented property since as per provision of Sec 30(a) of the Act cost of repair on rented property was also an allowable expenditure along with payment of rent of the property. Secondly, your assessee during the course of hearing of the assessment, vide its letter dt. 03.02.2015, has fully described the nature of activities carried on from each of the property and also the reason and circumstances for which said repairing work was carried on. Learned assessing officer, without going through the merit of the letter and without fully going through the details of expenditure, disallowed the entire expenses with a simple comment that entire expenses are of capital nature. Copy of the above letter as well as details of such expenses are attached. Al the expenses incurred are of day to day normal repairing and maintenance nature and some of them were made to ensure safety, security and benefit of the workers and staff since the properties are very old specially the city office which was built up near independence. No new structures are built up and expenses are all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as revenue or capital in nature. From that ruling, I find that the cardinal principle in such matter would be to gauge as to (i) whether the expenditure incurred was to bring in new assets or (ii) whether the expenditure incurred was for the purpose of obtaining new or fresh advantage, I find that neither of the two grounds could be imputed in the instant case going by the facts of the matter at hand. Further, I find that the Assessing Officer's observation that expenditure incurred on rented premises was not eligible for any deduction to be untenable since as per the provision of section 30(a) of the Act, cost of repair on rented property was also an allowable expenditure along with payment of rent of the property. In view of the foregoing discussion, I do not find any merit in the action of the AO in resorting to make the impugned disallowance of ₹1,07,03,835/- on both facts and law for which the same is directed to be deleted. This ground is allowed. Learned Departmental Representative vehemently contends during the course of hearing that the Assessing Officer had rightly disallowed the assessee s impugned claim to be not incurred in routine manner and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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