TMI Blog2019 (12) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... anted 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,68,323/ - without application of mind to the proper facts as available on record. 6. Because, the ld. CIT(A) has erred in failing to understand that the aggregate expenses of ₹ 24,68,323/- were revenue 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity connection to keep watch and ward of the tenanted premises and other necessary expenses. The assessee incurred such expenses in the premises obtained by assessee. 4. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer concluded that expenses are capital in nature as it was incurred for creating a new asset. The claim of the assessee that they undertake the renovation work and debited the expenses in Profit Loss A/c is not acceptable as the owner of premises has not authorized the assessee to carry out repair and renovation work. The Assessing Officer disallowed the entire expenditure of ₹ 95,81,077/-. 5. The 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/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain. Secondly, the assessee has not brought on record that the amount was credited in the Profit Loss A/c in any of the previous year. 7. On appeal before the ld. CIT(A), the disallowance on account of repair/maintenance was partly restricted by passing the following order: 5.2.5 In the instant case, the items of repair/maintenance strongly indicate that the appellant obtained new advantages and they far exceed the entitlement envisaged in the agreement. The expenditure was not to preserve and maintain an existing warehouse but to bring a' new creative studio into existence and thereby attain new advantages that the original asset was not designed to offer nor capable of offering. This con9~usion is further strengthened by the fact that the premises are leased @ ₹ 45,000/- per month for a period of 36 months. Thus, over the period of leave licence, the appellant was required to pay ₹ 26,20,000/-. As against this, the appellant incurred ₹ 95,81,077/- on refurbishing . Any prudent person would incur expense of more than 600% of 3 years' rental value of a premise only if there was substantial new advantage or additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repair work in the tenanted premises to provide enough water and new connection to the tenanted premises, provide/obtained new best electricity connection for the said premises, security of the said premises, getting/providing plastering and painting of the exterior of the building, general beautification of compound. The copy of leave and license/ lease agreement dated 05.04.2008 is placed on record. The assessee incurred the expenses as the assessee has acquired the said premises on leave and licence would be fit for its use as office etc. and would be repaired by the landlord. However, the landlord not carried out any repair. The assessee company negotiated in July 2008 with the trustee of the Trust for its office use as a Photography Studio. In the negotiation, the assessee was assured that there would be no difficulty in getting the change of user from Warehouse into a modern office. However, no permission was granted, for change of user, the assessee could not use the tenanted premises. The BMC sealed the tenanted property and it could not be made usable nor did the landlord fulfill its obligation and responsibilities under the lease for suitable user. The tenanted premise wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge no. 213 of Paper Book. Considering the facts of the present case, we find merit in the submissions of ld. AR of the 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. 14. Ground No.4 5 relates to disallowance of bad-debt. The ld. AR of the assessee during the hearing submits that she is not pressing these grounds of appeal. Considering the submission of ld. AR of the assessee, these grounds of appeal are dismissed as not pressed. 15. Ground No.6 relates to claim of bad-debt in the nature of revenue expenses. This ground of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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