M/s Touchstone Esates Private Limited , Bangalore V. Income Tax Officer Ward-7(1)(1), Bangalore

ITA 1252/BANG/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5942 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-02-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Capital asset; Commercial expediency; Revenue expenditure; Capital expenditure; Set aside
• Section: 13; 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER ITA NO. 1252 /BANG/2018 (ASSESSMENT YEAR: 20 13 - 14 ) M/S. TOUCHSTONE ESTATES PVT. LTD., NO.527, TOU CHSTONE, 2 ND MAIN, 3 RD CROSS, RMV 2 ND STAGE, 3 RD BLOCK, DOLLARS COLONY, BANGALORE - 560 094 .APPELLANT . PAN AADCT 5434B VS. INCOME TAX OFFICER , WARD 7(1)(1), BANGALORE. RESPONDENT. ASSESSEE BY: SHRI H. GURUSWAMY, ITP. REVENUE BY: SHRI PRIYADARSHI MISHRA, ADDL. CIT (D.R) DATE OF HEARING : 02.02 .20 2 1 . DATE OF PRONOUNCEMENT : 03 .02 .20 2 1 . O R D E R PER SHRI CHANDRA POOJARI, A.M. : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS) - 7 , BANGALORE DT.6.2.2018 FOR THE ASSESSMENT YEAR 2013 - 14. 2. THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS : 2 ITA NO. 1252/BANG/2018 3. THE FACTS OF THE CA SE 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 NO T MATERIALIZE AND THE ASSESSEE HAS TO FOREGO THE AMOUNT AS PER ARBITRATION. AFTER VERIFYING THE DETAILS, THE ASSESSING OFFICER 3 ITA NO. 1252/BANG/2018 HELD THAT THE PURCHASE OF PROPERTIES INVOLVED ARE IN THE NATURE OF CAPITAL ASSET. THE LOSS CLAIMED CANNOT BE ACCEPTED AS REVENU E 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 AUTHORITY. ON APPEAL, THE CIT (APPEALS) OBSERVED THAT THE LOSS INCURRED BY THE ASSESSEE IS IN CONNECTION WITH THE4 TRANSACTION FOR THE PURCHASE OF CAPITAL ASSET, THEREFORE, THE AMOUNT OF RS.17.50 LAKHS INCURRED BY THE ASSESSEE IS IN THE NATURE OF CAPITAL LOSS AND CANNOT BE ALLOWED AS REVENUE EXPENDITURE. AGGRIEVED BY THE ORDER OF CIT (APPEALS) , THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEES NATURE OF INCOME IS THAT OF REAL ESTATE DEVELOPMENT, INVESTMENT AND BROKERAGE. THE LD. AR SUBMITTED THAT THE ASSESSEE INTENDED TO PURCHAS E THE FOLLOWING TWO PROPERTIES AS GIVEN BELOW : NAME OF THE VENDOR LOCATION OF THE PROPERTY AGREED SALE CONSIDERATION AMOUNT OF ADVANCE PAID AMOUNT RECEIVED BACK LOSS INCURRED SRI G. DURGA PRASAD PROPERTY IN SY. NO.51/3, KEDAKAL VILL., SOMVARPETE TALUK, COORG DISTRICT. RS.45,00,000 RS. 20 LAKHS RS.15 LAKHS AFTER FORFEITURE OF 25% OF THE ADVANCE. RS.5 LAKHS SMT. T. RADHA PROPERTY IN SY. NO.71, KEDAKAL VILL., SOMVARPETE TALUK, COORG DISTRICT. RS.1,14,80,000 RS.50 LAKHS RS.37.50 LAKHS AFTER FORFEITURE OF 2 5% OF THE ADVANCE. RS.12.50 LAKHS 4 ITA NO. 1252/BANG/2018 THE LD. AR FURTHER SUBMITTED THAT THE SALE AGREEMENTS WERE NOT MATERIALISED AND THE AMOUNT OF ADVANCE WAS REFUNDED AFTER FORFEITURE OF 25% OF THE ADVANCE AS PER THE TERMS AGREED BEFORE THE ARBITRATOR AS PER THE SALE AGR EEMENT. THE A.O. AND CIT (APPEALS) HAVE NOT DISPUTED THE FORFEITED LOSS OF ADVANCE OF RS.17,50,000 (RS.12,50,000 + RS.5,00,000) BUT THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA IN THE P & L ACCOUNT THE AMOUNT WAS DEBI TED AS CAPITAL LOSS. THE CIT (APPEALS) HAS ALSO UPHELD THE VIEW OF THE ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE A.O. AND CIT (APPEALS) HAVE ACCEPTED THAT THE NATURE OF THE BUSINESS OF THE ASSESSEE WAS THAT OF REAL ESTATE DEVELOPMENT, INVESTMENT, BROKERAGE AND CULTIVATION OF THE LANDS. THE PROPERTIES WERE INTENDED TO BE PURCHASED AS PART OF BUSINESS AND THEREFORE THE LOSS INCURRED ON ACCOUNT OF FORFEITURE OF ADVANCE WAS ALSO RELATED TO THE BUSINESS A ND CLAIMED THE FORFEITED AMOUNT AS BUSINESS LOSS. HE PRAYED THAT ORDERS OF LOWER AUTHORITIES BE SET ASIDE AND ALLOW THE CLAIM OF THE ASSESSEE TOWARDS THE LOSS INCURRED ON ACCOUNT OF FORFEITURE OF THE ADVANCE AMOUNT PAID FOR PURCHASE OF PROPERTIES. 4.1 I N SUPPORT OF THE CLAIM OF ASSESSEE, T HE LD. AR RELIED ON THE CO - ORDINATE BENCH DECISION OF ITAT, BANGALORE BENCH IN ITA NOS.2083, 2086, 2087 & 5 ITA NO. 1252/BANG/2018 2088/BANG/2016 VIDE ORDER DT.20.07.2018 IN THE CASE OF DCIT VS. M/S. MAX HYPERMARKET INDIA PVT. LTD. 5. O N 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 ASSESS EE 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. DURGA PRASAD AND RS.12.50 LAKHS ON ACCOUNT OF ADVANCE GIVEN TO SMT. T RADHA, TOTALING THE AMOUNT TO RS.17.50 LAKHS. THE ASSESSEE HAS SHOWN THIS AMOUNT AS A CAPITAL LOSS IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31.03.2013. HOWEVER IN THE RETURN OF INCOME THE ASSESSEE CLAIMED THE SAME AS BUSINESS LOSS. IN THE PRESENT CA SE, THE ASSESSEE IS IN THE FOLLOWING BUSINESSES AS PER T HE MOU : 6 ITA NO. 1252/BANG/2018 (A) MAIN OBJECTS TOBE PURSUED BY THE COMPANY ON ITS INCORPORATION ARE : 1. TO CARRY ON IN INDIA OR ABROAD, ;THE BUSINESS OF REAL ESTATE AGENTS, BROKERS, CONSULTANTS, BUSINESS BROKERS, DEVELOPERS, COLONIZERS AND TO ENGAGE IN ALL TYPES OF CONSTRUCTION AND TRADING ACTIVITIES RELATING TO ALL TYPES OF IMMOVABLE PROPERTIES AND ALL TYPES OF INFRASTRUCTURE PROJECTS EITHER INDEPENDENTLY OR JOINTLY IN PARTNERSHIP, JOINT VENTURE OR OTHERWISE, OR T O TRANSACT ON COMMISSION, BROKERAGE OR OTHERWISE. 2. TO CARRY ON THE BUSINESS, EITHER INDIVIDUALLY OR THROUGH A MARKET NETWORK OR AS FRANCHISORS OR OWN NETWORK OF PROFESSIONALS, IN THE REAL ESTATE INDUSTRY INCLUDING AS REAL ESTATE ADVISORS, AGENTS, BROK ERS, CONSULTANTS, HOME LOAN SPECIALISTS, ENGINEERS, DESIGNERS OR ANY OTHER PROFESSIONALS, ANY BUSINESS RELATED TO REAL ESTATE INDUSTRY AND TO ENGAGE IN ANY OTHER TYPE OF ARRANGEMENTS WITH THE PROFESSIONALS IN REGARD TO THE REAL ESTATE BUSINESS OR ANY OTHER BUSINESS RELATED THERETO. THIS FACT ALSO ADMITTED BY THE ASSESSING OFFICER IN HIS ORDER STATING THE NATURE OF THE BUSINESS OF THE ASSESSEE AS REAL ESTATE, DEVELOPMENT, INVESTMENT, BROKRING AND CULTIVATION OF LAND. THE AMOUNTS REPRESENTED THE ADVANCE S GIVEN TO THE PARTIES. ADVANCES ARE GIVEN DURING THE COURSE OF BUSINESS FOR PURCHASE OF IMMOVABLE PROPERTIES I.E. COFFEE ESTATES. AN AMOUNT OF RS.17.50 LAKHS BECAME IRRECOVERABLE FORM THE PARTIES TO WHOM THE ASSESSEE MADE ADVANCES. THE ADVANCES GIVEN WE RE TOTALLY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN OBSERVING THAT THE AMOUNT OF ADVANCE WAS GIVEN FOR PURCHASE OF CAPITAL ASSET AND NON - RECOVERY OF THE SAME IS IN THE NATURE OF CAPITAL LOSS. IN OUR OPINION, THE LOSS INCURRED BY THE ASSESSEE BEING A REVENUE LOSS AS THIS HAS BEEN INCURRED IN THE BUSINESS ACTIVITIES OF THE ASSESSEE AND THE ASSESSEE IS 7 ITA NO. 1252/BANG/2018 ENTITLED O CLAIM THE SAME AS BUSINESS LOSS U/S. 37 OF THE ACT. IN THE PRESENT CASE, THE LOSS HAS DIRECT NEXUS WITH CARRYING ON BUSINESS AND IS 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 WI TH 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. CAPITA LIZATION 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 NOT IPSO FACTO MAKE THAT EXPENDITURE AS CAPITAL EXPENDITURE FOR THE PURPOSE OF INCOME TAX. HENCE WE ARE OF THE VIEW THAT THE NON - RECOVERY OF ADVANCES GIVEN BY THE ASSESSEE FOR ACQUIRING 8 ITA NO. 1252/BANG/2018 IMMOVABLE PROPERTY IN CARRYING OUT THE BUSINESS ACTIVITIES OF THE ASSESSEE HAD TO BE TREAT ED AS BUSINESS LOSS INSTEAD OF CAPITAL LOSS AND TO BE ALLOWED U/S. 37 OF THE ACT. 6.1 WE FIND THAT THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. MAX HYPERMARKET INDIA PVT. LTD. (SUPRA) HELD IN PARAS 5.3.1 TO 5.4.4 AS UNDER : 5. 3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CO NSIDERED THE MATERIAL ON RECORD ; INCLUDING THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS ON THE ISSUE BEFORE US ARE NOT IN DISPUTE. THE ASSESSEE IS IN THE BUSINESS OF RETAIL TRADE BY OPER ATING SUPER - MARKET STORES ACROSS THE COUNTRY IN THE NAME OF SPAR. THE ASSESSEE HAD PAID RENTAL ADVANCE OF RS.10 LAKHS TO A LANDLORD FOR THE PURPOSE OF OBTAINING A PROPERTY ON RENTAL BASIS TO OPEN AND OPERATE A STORE AT MOHALI. HOWEVER, THE ASSESSEE SUBSE QUENTLY, FOR REASONS OF COMMERCIAL EXPEDIENCY, DECIDED AGAINST OPENING THE STORE AT MOHALI. THE LANDLORD FORFEITED THE AMOUNT OF RENTAL ADVANCE PAID BY THE ASSESSEE AND THE ASSESSEE HAD WRITTEN OFF THIS AMOUNT OF RS.10 LAKHS IN ITS PROFIT AND LOSS ACCOUNT. THE AO WAS OF THE VIEW THAT THE AMOUNT OF RENAL ADVANCE IS CAPITAL IN NATURE AND ACCORDINGLY DISALLOWED THE ASSESSEES CLAIM FOR THE SAID AMOUNT TO BE AS REVENUE EXPENSE. ON APPEAL, THE LD CIT(A) FOR THE REASONS RECORDED IN THE IMPUGNED ORDER HELD THAT WR ITE OFF THE AFORESAID RENTAL ADVANCE IS PERMISSIBLE AND ALLOWED THE ASSESSEES CLAIM. 5.3.2 THE ASSESSEES CONTENTION IS THAT THE SAID PREMISES AT MOHALI WAS TAKEN ON LEASE TO CARRY ON THE EXISTING BUSINESS OF THE ASSESSEE AND THEREFORE THE PAYMENT OF REN TAL ADVANCE BY IT, IN THIS REGARD, WAS IN THE NORMAL COURSE OF AND INCIDENTAL TO THE CONDUCT OF ITS BUSINESS ACTIVITY. IT WAS SUBMITTED THAT BY MAKING THE RENTAL ADVANCE/DEPOSITS, THE ASSESSEE HAD NEITHER ACQUIRED ANY ASSET OF CAPITAL NATURE NOR HAS IT RES ULTED IN ANY BENEFIT OF ENDURING NATURE. ACCORDING TO THE ASSESSEE, SINCE THE RENTAL DEPOSIT HAS BEEN FORFEITED, THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNT IN THE PROFIT AND LOSS ACCOUNT AS THE LOSS HAS ACTUALLY BEEN INCURRED. THE LD AR CONTENDED THA T IN VIEW OF THE ABOVE FACTS, THE LD CIT(A) HAS CORRECTLY ALLOWED THE SAME AS REVENUE EXPENDITURE. 5.3.3 IN SUPPORT OF THE ASSESSEES CONTENTIONS, THE LD AR PLACED RELIANCE ON A FEW JUDICIAL PRONOUNCEMENTS, AND PARTICULARLY ON THE DECISION OF THE CO - ORDINA TE 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 LOS S 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 HONBLE 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 PROFITS OF THE ASESSEE. THE AO HAS DISALLOWED THE SAME WITH THE CONTENTION THAT THE SAME IS NOT REVENUE ILL AND, HENCE, NOT DEDUCTIBLE UNDER THE ACT. THE VIEW OF THE AO WAS AFFIRMED BY THE DRP; HENCE, THE ASSESSEE IS IN APPEAL BEFORE US OIL ISSUE. 6.1 THE LEARNED AR HAS FILED WRITTEN SUBMISSIONS. THE SUMMARY OF THE SAME READS AS FOLLOWS: 9 ITA NO. 1252/BANG/2018 'THE LOSSES ARISING IN COURSE OF THE BUSINESS, OTHER THAN A CAPITAL LOSS, WHICH IS INCIDENTAL TO THE TRADE WOULD QUALIFY FOR DEDUCTION UNDER SECTION 28 OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BADRIDAS DAGA V. CIT(34 ITR 10) (SC), WHEREIN IT WAS HELD THAT 'WHEN A CLAIM IS MADE FOR A DEDUCTION FOR WHICH THERE IS NO SPECIFIC PROVISION IN THE ACT, ALLOWABILITY OF THE SAME WOULD DEPEND ON WHETHER, HAVING REGARD TO ACCEPTED COMMERCIAL PRACTICE AND TRADING PRINCIPLES, IT CAN BE SAID TO ARISE OUT OF THE CARRYING OIL THE BUSINESS AND TO BE INCIDENTAL TO IT'. SINCE THE VERY PURPOSE OF TAKING THE SAID PREMISES ON RENT WAS TO MERELY TO CONDUCT THE EXISTING BUSINESS OPERATIONS, THE LOSS ARISING TO THE APPELLANT ON ACCOUNT OF THE WRITE OFF OF THE RENTAL DEPOSIT WOULD BE INCIDENTAL TO THE BUSINESS. THE APPELLANT DID NOT ACQUIRE ANY ASSET OF CAPITAL NATURE IN THE PRESENT CASE, NOR THERE IS ANY CHANGE I N THE CAPITAL FIELD AND THUS THE LOSS ARISING DUE TO WRITE OFF OF THE RENTAL DEPOSIT IS PURELY REVENUE IN NATURE. RELIANCE IS PLACED ON THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF IBM WORLD TRADE CORPORATION V. CIT (186 ITR 412) WHEREIN IT HELD THAT IN OU R VIEW THE ACQUISITION OF PREMISES ON LEASE WOULD NOT ORDINARILY BE IN THE CAPITAL FIELD AND HENCE WE HAVE NO HESITATION IN HOLDING THAT THE MONEYS ADVANCED BY THE ASSESSEE IN PURSUANCE OF THESE AGREEMENTS TO THE LANDLORD FOR THE PURPOSES OF AND IN CONNECT ION WITH THE ACQUISITION OF THE PREMISES ON LEASE, WERE FOR THE PURPOSE OF BUSINESS. NATURALLY, THEREFORE, WHEN SUCH ADVANCES ARE LOST TO THE ASSESSEE, THE LOSS WOULD BE A BUSINESS LOSS AND NOT A CAPITAL LOSS WHICH IS ELIGIBLE FOR DEDUCTION WHILE COMPUTING THE BUSINESS PROFITS OF THE ASSESSEE. RELIANCE IS ALSO PLACED ON THE RECENT RULING OF MUMBAI TRIBUNAL IN THE CASE OF UNITED MOTORS V. ITO (6 TAXMANN.COM 32) WHEREIN IT WAS HELD THAT WRITE OFF OF THE INTEREST FREE DEPOSIT MADE BY THE ASSESSEE TO THE LICENS OR AGAINST RENTAL PROPERTIES WAS A LOSS INCIDENTAL TO THE BUSINESS AND HENCE COULD 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 FOR CONSIDERATION. AF TER HEARING THE RIVAL PARTIES, THE HON'BLE BENCH HAD OBSERVED THAT 'WHETHER SINCE BY MAKING INTEREST - FREE DEPOSITS FOR PURPOSE OF OBTAINING PERMISSIVE USE OR LICENCE TO USE PREMISES, ASSESSEE DID NOT OBTAIN ANY ENDURING ADVANTAGE OR INTEREST IN PROPERTIES, LOSS OF SECURITY DEPOSIT AND WRITE OFF OF SAME AGAINST RENTAL OF PROPERTIES WAS A LOSS INCIDENTAL TO BUSINESS AND, THUS, ASSESSING OFFICER WAS RIGHT IN ALLOWING SAID AMOUNT AS A DEDUCTION.' 6.4 IN CONFORMITY WITH THE FINDINGS OF THE HONBLE MUMBAI BENCH O F THE TRIBUNAL ON A SIMILAR ISSUE (SUPRA), WE ARE OF THE FIRM VIEW THAT THE WRITE OFF OF THE INTEREST FREE DEPOSIT MADE BY THE ASSESSEE TO THE LICENSOR AGAINST RENTAL PROPERTIES WAS A LOSS INCIDENTAL TO THE BUSINESS AND, HENCE, THE ASSESSEE WAS ENTITLED TO CLAIM THE SAME AS ALLOWABLE DEDUCTION. IT IS ORDERED ACCORDINGLY. 5.4.4 IN THE CASE ON HAND ALSO, THE FACTUAL MATRIX IS SIMILAR. THE ASSESSEE IS IN THE BUSINESS OF RUNNING STORES AND RENTING OUT PREMISES IN THIS REGARD IS PART OF ITS NORMAL BUSINESS ACTIV ITY. THEREFORE, IN OUR 10 ITA NO. 1252/BANG/2018 CONSIDERED VIEW, THE IMPUGNED TRANSACTION IS INTRINSICALLY LINKED AND IDENTICAL TO THE ASSESSEES CORE BUSINESS ACTIVITY. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT THE LD CIT(A) HAS RIGHTLY HELD THAT THE WRITE OFF OF REN TAL ADVANCE PAID IS IN THE REALM OF REVENUE EXPENDITURE AND ALLOWABLE AS DEDUCTION. WE, THEREFORE, UPHOLD THE DECISION OF THE LD CIT(A) ON THIS ISSUE AND CONSEQUENTLY DISMISS GROUND NO.2 RAISED BY REVENUE. BY FOLLOWING THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL CITED ABOVE A S WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ALLOW THE GROUND TAKEN BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED O N THE CAPTION PAGE. SD/ - SD/ - ( SMT. BEENA PILLAI ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03 .02. 20 2 1 . *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT , BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR IN COME - TAX APPELLATE TRIBUNAL BANGALORE