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TMI Blog2021 (2) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... s that was sustained during the course of its business, covered by the provisions of S.37(1); and there being no suspicion with regard to the genuineness of transactions by the AO, the denial of claim for revenue loss was in order. 4. Withour prejudice, the CIT(A) should have appreciated the alternative ground and directed the AO to at least compute capital loss. 5. The Appellant craves the leave of the Court to add, amend, alter, and/or withdraw any or all grounds before or during the hearing. 3. The facts of the case are that the assessee debited a sum of Rs. 17.50 lakhs to the P & L Account towards capital loss during the year under consideration. The assessee explained the same as the amount forfeited out of advance given for purchase of coffee estate which did not materialize and the assessee has to forego the amount as per arbitration. After verifying the details, the Assessing Officer held that the purchase of properties involved are in the nature of capital asset. The loss claimed cannot be accepted as revenue loss. Thus the Assessing Officer disallowed the amount debited to the P & L Account as capital loss. Aggrieved the assessee, appealed before the first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of the claim of assessee, the ld. AR relied on the co-ordinate Bench decision of ITAT, Bangalore Bench in ITA Nos.2083, 2086, 2087 & 2088/Bang/2016 vide order dt.20.07.2018 in the case of DCIT Vs. M/s. Max Hypermarket India Pvt. Ltd. 5. On the other hand, the learned Departmental Representative supported the order of CIT (Appeals). He submitted that the assessee had made advances to purchase the coffee estate which is a capital asset and the failure of the assessee to recover the same is to be considered as capital loss and the assessee also treated the amount as capital loss in its profit and loss account as such the condition laid down u/s. 37 of the Income Tax Act, 1961 ('the Act') is not satisfied so as to allow as a business loss. 6. We have heard both the parties and perused the material on record. The assessee has furnished the details of advancing the amount to Shri G. Durga Prasad at Rs. 45 lakhs and Smt. T. Radha at Rs. 1,14,80,000. Out of these amounts advanced, the assessee was able to recover Rs. 40 lakhs from Shri G. Durga Prasad and Rs. 87.50 lakhs from Smt. T Radha. The assessee claimed loss of Rs. 5 lakhs on account of advance given to Shri G. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidental to the business activity of the assessee wherein immovable property is stock in trade to the assessee. The assessee's business activity is dealing in Real Estate. Since there is a direct and proximate nexus with the assessee and the loss is incidental to the business of the assessee. The deduction has to be granted to the assessee u/s. 37 of the Act. One more argument was advanced by the ld.DR that the assessee treated the amount as capital loss in its books of accounts and the same was reflected in the P & L Account. The assessee might have treated this loss as capital expenditure in regular books of accounts maintained and for fairly disclosing financial status of the assessee, as required by law. Capitalization of this expenditure in the books of accounts alone was not the decisive factor for examining the expenditure for the purpose of income tax. The name given to an expenditure is a nomenclature in the books of accounts is not the final test to decide the exact nature of expenditure for the purpose of income tax. Therefore the classification of this expenditure as capital in nature in its books of accounts of the assessee for the purpose of Companies Act does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expenditure. 5.3.3 In support of the assessee's contentions, the ld AR placed reliance on a few judicial pronouncements, and particularly on the decision of the co-ordinate bench of this Tribunal in the case of LG Soft India (P) Ltd., Vs. DCIT (2013) 35 taxmann.com 202 (BangTribunal) submitted that on similar facts, the Tribunal held that the write off of interest free deposit made by the assessee to the licensor was a loss incidental to the business and hence liable to claim the same as allowable deduction. The relevant portion of the decision of the co-ordinate bench in the case of LG Soft India (P) Ltd., (Supra) at paras 6 to 6.4 thereof are extracted hereunder:- "6. The assessee had taken a building on lease for its office purposes. As per the lease deed the Appellant had placed a refundable deposit of Rs. 24,93,600/- with the landlord. Since the assessee had difficulty in recovering the deposit from the landlord, it had Filed a suit before the Hon'ble High Court of Karnataka, which was dismissed oil ground that the lease deed was not duly registered. Hence, the assessee wrote off the rental deposit in its books and claimed as deduction while computing business profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be said to be unsustainable in law. The Appellant further places reliance on the Bangalore Tribunal Ruling in the case of Wendt (India) Limited (ITA 269/Bang/1) wherein write off of irrecoverable inter-corporate deposits were held to be an allowable deduction under the Act. Every expenditure resulting in some kind of enduing benefit would not necessarily be a capital outlay and hence what needs to be considered is whether such an expenditure is giving any benefit to the assessee in capital field. [Empire Jute Co. Ltd. v. CIT(l980) (124 ITR I) (SC)I. Hence, the fact that the lease agreement is for a period of more than year, would not be relevant to determine the nature of the rental deposit as to whether the same is revenue or capital outlay". 6.2 The learned D R present supported the reasons recorded by the AO in rejecting the assessee's contentions. 6.3 We have carefully considered the submissions of the assessee as well as the Departmental Representative on the issue. The Hon'ble Mumbai Bench 'F', in the case of United Motors (India) Ltd. v. ITO{ 20101 6 taxmann.com 32, wherein a similar issue to that of present issue under consideration had come up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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