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2019 (12) TMI 145

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..... substantial relief to the assessee. We have noted that order giving effect to the order of ld CIT(A) is not placed on record The assessee has furnished the break-up of all these expenses, details of which are available at page no. 213 of Paper Book. We find merit in the submissions assessee, that the assessee despite incurring huge expenditure could not use the tenanted premises for its business purpose and the expenses incurred by the assessee are allowable expenses. Therefore, the issue is restored back to the file of assessing officer to verify the remaining expenses which were incurred on repair / maintenance for use of tenanted preemies and allow appropriate relief to the assessee in accordance with law. Needless to say that before passing the order, the Assessing Officer shall grant opportunity to the assessee to substantiate the claim / expenses. In the result, this ground of appeal is allowed for statistical purpose. Claim of bad-debt in the nature of revenue expenses - AO disallowed the claim by taking view that suit filed by landlord has not attained the finality - CIT(A) upheld the action of Assessing Officer holding that the assessee has not fulfill the requirement of s .....

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..... e in nature and allowable, if not as bad debt then other revenue heads. 2. Brief facts of the case are that the assessee is a company engaged in the business of providing creative services, design, strategy, branding, website, advertising, photography, cinema works, film-making and other consultancy services, filed its return of income for Assessment Year 2012-13 declaring total loss at ₹ 1,04,24,954/-. The case was selected for scrutiny. During the assessment, from the financial statement furnished by the assessee, the Assessing Officer noted that the assessee has claimed expenses of ₹ 95,81,077/-, incurred on account of interior in rented premises, furniture, fixture, renovation and installation of water connection etc. It was also noted that the tenanted premises could not utilized by assessee for its business due to legal problem. The expenses incurred by assessee consists on the following items: Particulars Amount (Rs.) New Studio Refurbishment Assets Being payment for our office situated at Sitaram Mill Compound 13,89,900.00 New Studio Refurbishment Expenses Being payment towards renovation in at Sitaram Mill Compound 13,03,750.00 Furniture & Fixture being pay .....

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..... Assessing Officer further noted that the assessee has written of ₹ 24,68,323/-. The assessee was asked to substantiate it claim. The assessee filed its reply dated 09.02.2015 and furnished the working of bad-debts written off. The assessee furnish the following details/working: 6.2 The assessee vide letter dated 09.02.2015 has made the submission in this regard and the relevant portion is reproduced as under: Bad-debts ₹ 24,68,323/- Details of amount written of Amount (Rs. 1 King Fisher Air Lines Ltd. (Since this company has gone into liquidation the said amount has been written off). 6,209.00 2 Komal Porecha Associates Please refer to Annexure 95 attached to our deter dated 14.11.2014. Excess payment made has been written off. 29,611.00 3 Tantia Charitable Trust Being amount paid w/off. Please refer to Annexure 96(14.11.2014). 2,29,715.00 In view of Leave and Licence agreement, dt. 01.05.2008, (Annexure 139 / 150 attached to our letter dt. ] 4.11. 20 14) and small cause court case filed by them for further recovery of the lease rent from this company the said amount has been written off 9. VISHAL ASSOCIATES Please refer to Annexure 98/ 99 (14.11.2014) being amount pai .....

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..... atment accorded by Assessing Officer is upheld. However, it is also noted that part of the expenses such as cabinets, furniture etc., were incurred on items that constitute office furnishing. These are not part of new assets or advantages in context of the decision of Hon'ble ITAT cited above. Therefore, the Assessing Officer is directed to verify and allow expenditure on purchase of office furniture. This ground is partly allowed. 8. The disallowance of entire bad-debt was confirmed by ld CIT(A) holding as under: 5.3.1 - addition of ₹ 24,68,323/- on account of bad debts written off. The Assessing Officer has discussed this at para 6 of his order. He has enumerated the items of bad debts written off as per the appellant at para 6.2 of his order. He has further made categorical observation that the appellant has not established that the amounts written off were taken into account while computing the income of the previous year under consideration or any earlier previous year. Therefore, the requirements of section 36(2) were not met. 5.3.2 During the course of appellate proceedings also, the appellant was notable to establish that the amounts written off were taken into ac .....

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..... ted premises. The assessing officer disallowed the entire expenses, however, the ld CIT(A) granted substantial relief to the assessee. The ld. AR of the assessee submits that as of now, the dispute remains only of ₹ 1,86,831/-. 11. The landlord also filed a Suit for Recovery of rent despite the fact that the premises could not be used due to legal bar of its user. The ld. CIT(A) allowed only expenditure incurred on cabinets furniture or items that constitute of office furniture and disallowance of remaining expenditure was upheld. 12. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 13. We have considered the rival submission of the parties and gone through the orders of lower authorities. The Assessing Officer disallowed the entire expenses by taking view that the assessee incurred expenditure which is capital in nature and hit by the provision of section 37(1). The Assessing Officer further held that in the suit for recovery, the landlord claimed that assessee was not authorized to claim the expenses. The ld. CIT(A) upheld the action of Assessing Officer as recorded in para-5.2.5 of impugned order and granted part relief to the assesse .....

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..... he assessee for payment of mesne profit by way of compensation to the landlord. The copy of order of Small Cause Court dated 23.10.2015 is filed on record. The ld. AR further submits that the assessee could use the tenanted premises despite incurring huge expenses and the landlord recovered the rent or leaves and licence charges, therefore, the assessee is entitled for expenses as a revenue expenses, if not allowed as bad-debt. 16. On the other hand, the ld. DR for the revenue supported the order of lower authorities. 17. We have considered the submission of ld. representative of the parties and perused the record carefully. Before the Assessing Officer, the assessee claimed the amount of ₹ 24,68,323/- as a bad-debt, the details of which we have recorded in para-4 supra. The Assessing Officer disallowed the claim by taking view that suit filed by landlord has not attained the finality. The ld. CIT(A) upheld the action of Assessing Officer holding that the assessee has not fulfil the requirement of section 36(2). Before us, the assessee in alternative has claimed the amount as revenue expenditure. Considering the fact that the assessee has made the payment by the order of Civi .....

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