PHOTOLINK CREATIVE INDIA P.LTD, MUMBAI V. DCIT CIR 3(2)(2), MUMBAI

ITA 2824/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3392 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Charitable institution; Bad and doubtful debts; Revenue expenditure; Capital expenditure; Liquidation

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 2824/MUM/2017 (ASSESSMENT YEAR 2012-13 ) PHOTOLINK CREATIVE INDIA PVT. LTD. 1005, EMBASSY CENTRE, NARIMAN POINT, MUMBAI-400021. PAN: AAECP6310K VS. DCIT CIRCLE- 2(2)(2), MUMBAI. APPELLANT RESPONDE NT APPELLANT BY : MS. RITIKA AGARWAL (AR) RESPONDENT BY : SHRI CHAUDHARY ARUN KUMAR SINGH (DR) DATE OF HEARING : 28.08.2019 DATE OF PRONOUNCEMEN T : 15.11.2019 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-8, MUMBAI DATED 25.10.2016 FOR ASSESSMENT YEAR 2012-13 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. BECAUSE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT O UT OF THE TOTAL RENOVATION EXPENSE OF RS.95,81 ,077/- ONLY, AN AMOU NT OF RS.59,72,177/- ON ACCOUNT OF FURNITURE AND FIXTURES QUALIFIED AS R EVENUE EXPENDITURE. 2. BECAUSE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT T HE EXPENDITURE INCURRED ON ACCOUNT OF REFURBISHMENT OF PREMISES AN D PURCHASE OF AIR CONDITIONERS AMOUNTING TO RS.36,58,900/- CONSTITUTE D AS CAPITAL EXPENDITURE IGNORING THE FACT THAT THE APPELLANT IS A LESSEE.. 3. BECAUSE, THE LD. CIT(A) HAS ERRED IN IGNORING THE F ACT THAT THE APPELLANT AS A LESSEE OBTAINED PREMISES ON HIGHLY SUBSIDISED RENTAL IN ORDER TO COMPENSATE FOR REFURBISHMENT EXPENSE REQUIRED TO BE INCURRED ON THE RENTED PREMISES BELONGING TO THE LAND OWNER. 4. BECAUSE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT T HE AMOUNT OF RS.24,68,323/ - WRITTEN OFF ON ACCOUNT OF BAD DEBT WAS NOT ALLOWABLE ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 2 SINCE THE SAME HAD NOT BEEN TAKEN INTO ACCOUNT WHIL E COMPUTING THE INCOME OF THE PREVIOUS YEAR OR EARLIER PREVIOUS YEA RS. 5. BECAUSE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.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 UND ERSTAND THAT THE AGGREGATE EXPENSES OF RS. 24,68,323/- WERE REVENUE IN NATURE AND ALLOWABLE, IF NOT AS BAD DEBT THEN OTHER REVENUE HE ADS. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROVIDING CREATIVE SERVICES, DESIGN, ST RATEGY, BRANDING, WEBSITE, ADVERTISING, PHOTOGRAPHY, CINEMA WORKS, FI LM-MAKING AND OTHER CONSULTANCY SERVICES, FILED ITS RETURN OF INCOME FO R ASSESSMENT YEAR 2012-13 DECLARING TOTAL LOSS AT RS. 1,04,24,954/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT, FROM THE FINAN CIAL STATEMENT FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER NO TED THAT THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 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 TE NANTED PREMISES COULD NOT UTILIZED BY ASSESSEE FOR ITS BUSINESS DUE TO LE GAL PROBLEM. THE EXPENSES INCURRED BY ASSESSEE CONSISTS ON THE FOLL OWING 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 PAYMENT FOR FURNITURE AND FIXTURES FOR OUR OFFICE SITUATED AT SITARAM MILL COMPOUND. 59,22,177.00 AIR CONDITIONS BEING AMOUNT TRF. TO CAPITAL WIP 9,6 5,260.00 TOTAL 95,81,077.00 ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 3 3. THE ASSESSEE WAS ISSUED SHOW-CAUSE NOTICE AS TO WHY THE EXPENSES SHOULD NOT BE DISALLOWED AS THE EXPENSES WERE ON AC COUNT OF INTERIOR PREMISES, FURNITURE, FIXTURE, WHICH WERE NOT UTILIZ ED. THE ASSESSEE FILED ITS REPLY DATED 09.02.2015. IN THE REPLY THE ASSESS EE EXPLAINED THAT THEY HAVE ENTERED INTO AGREEMENT FOR LEAVE AND LICENCE W ITH TANTIA CHARITABLE TRUST ON 05.04.2008. THE OFFICE PREMISES WAS TAKEN ON LEASE, WAS A WAREHOUSE, AND WAS NOT READILY USEABLE IN ABSENCE O F CERTAIN REPAIR, WHICH WAS AUTHORISED BY LANDLORD TO THE ASSESSEE IN TERMS OF LEASE AGREEMENT. HOWEVER, DUE TO NON-AVAILABILITY OF PROP ERTY DOCUMENT, BOMBAY MUNICIPAL CORPORATION (BMC) CLEARANCE FOR RE PAIRS WAS NOT SANCTIONED. THE ASSESSEE HAD TAKEN THE PREMISES BY CONSIDERING THAT IT WOULD BE FIT FOR ITS USES OF OFFICE AND THE NECESSA RY MAJOR REPAIR WOULD BE CARRIED OUT BY THE OWNER, HOWEVER, THE EXPENSES INCURRED BY THE ASSESSEE. THE ASSESSEE ALSO EXPLAINED THAT THE ASSE SSEE WAS ASSURED THAT THERE WOULD BE NO DIFFICULTY IN CHANGE OF USER AND WORK TO BE CARRIED OUT TO TRANSFER OF OLD WAREHOUSE INTO A MODERN OFFICE P REMISES. HOWEVER, THE PREMISES COULD NOT BE OCCUPIED AS THE PROPERTY/ TENANTED/ AN OFFICE PREMISE WAS SEALED BY MUMBAI MUNICIPAL CORPORATION AFTER ISSUANCE OF STOP-WORK-NOTICE. THE SAID STOP-WORK-NOTICE WAS ISS UED ON 08.10.2008 WHICH PREVENTED THE NECESSARY REPAIR WORK FOR CONVE RTING THE TENANTED PREMISES INTO OFFICE PREMISES. AS PER THE AGREEMENT , THE ASSESSEE IS ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 4 AUTHORISED TO CARRY OUT THE NECESSARY BEAUTIFICATIO N OF COMPOUND AND WATER AND NEW ELECTRICITY 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 ASSE SSING OFFICER. THE ASSESSING OFFICER CONCLUDED THAT EXPENSES ARE CAPIT AL 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 EXPEN SES IN PROFIT & LOSS A/C IS NOT ACCEPTABLE AS THE OWNER OF PREMISES HAS NOT AUTHORIZED THE ASSESSEE TO CARRY OUT REPAIR AND RENOVATION WOR K. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE OF RS. 95 ,81,077/-. 5. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESS EE HAS WRITTEN OF RS. 24,68,323/-. THE ASSESSEE WAS ASKED TO SUBSTANTIATE IT CLAIM. THE ASSESSEE FILED ITS REPLY DATED 09.02.2015 AND FURNI SHED THE WORKING OF BAD-DEBTS WRITTEN OFF. THE ASSESSEE FURNISH THE FOL LOWING 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 UN DER: BAD-DEBTS RS. 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 2,29,715.00 ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 5 BEING AMOUNT PAID W/OFF. PLEASE REFER TO ANNEXURE 96(14.11.2014). IN VIEW OF LEAVE AND LICENCE AGREEMENT, DT. 01.05.2 008, (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 CO MPANY THE SAID AMOUNT HAS BEEN WRITTEN OFF 9. VISHAL ASSOCIATES PLEASE REFER TO ANNEXURE 98/ 99 (14.11.2014) BEING AMOUNT PAID TO THEM, THE DIFFERENCE OF RS. 1,17,277/- BEING EXCESS AMOUNT PA D TO THEM ON ACCOUNT OF SERVICE LAX SINCE NOT CLARIFY FOR SET WRITTEN OFF. GIRDHARILAL TANNTIA RS. 8,41,600/- BEING AMOUNT PAID VIDE LEAVE AND LICENCE AGREEMENT DT. 01.05.2008 (ANNEXURE 150 - 14.11.2014) SINCE THIS ILL NOT REC OVERABLE WRITTEN OFF TANTIA CHARITABLE TRUST RS. 12,62.600/- BEING DEPOSIT PAID TO TANTIA CHARITABLE TRUST RS, 1 2,64,400/ - WRITTEN OFF IN VIEW OF THE LEAVE AND LICENCE AGREEMENT CIT. 01.05. 2010 [ANNEXURE 132/ 11.11.2014) AND BASED ALL CIRCUMSTANCES THAT THIS A MOUNT IS IRREVOCABLE (ANNEXURE 112 / 14.11.2014) SINCE THE SAID COMPANY HAS FILED SUIT OF RENT (AL1NEXURE 112/ 14.11.2014) WHICH IS NOT PROVIDED F OR IN TILE ACCOUNTS. HOWEVER AMOUNT PAID AS DEPOSIT HAVE BEEN WRITTEN OF F. 6. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER HOLDING THAT THE PAYMENT MADE TO GIRDHARILAL TANTIA CHARITA BLE TRUST ARE NOTHING BUT A DEPOSIT PAID TO LANDLORD ON EXECUTION OF LEAS E AGREEMENT. THE ASSESSEE HAS DEBITED THE AMOUNT AS THE LANDLORD HAS FILED SUIT FOR RECOVERY OF RENT AND THAT THE OUTCOME OF SUIT IS NO T CERTAIN. SECONDLY, THE ASSESSEE HAS NOT BROUGHT ON RECORD THAT THE AMO UNT WAS CREDITED IN THE PROFIT & LOSS A/C IN ANY OF THE PREVIOUS YEAR. 7. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE O N ACCOUNT OF REPAIR/MAINTENANCE WAS PARTLY RESTRICTED BY PASSING THE FOLLOWING ORDER: 5.2.5 IN THE INSTANT CASE, THE ITEMS OF REPAIR/MAIN TENANCE STRONGLY INDICATE THAT THE APPELLANT OBTAINED 'NEW ADVANTAGES' AND TH EY FAR EXCEED THE ENTITLEMENT ENVISAGED IN THE AGREEMENT. THE EXPENDI TURE WAS NOT TO PRESERVE AND MAINTAIN AN EXISTING WAREHOUSE BUT TO BRING A' NEW CREATIVE STUDIO INTO EXISTENCE AND THEREBY ATTAIN NEW ADVANTAGES THAT TH E ORIGINAL ASSET WAS NOT ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 6 DESIGNED TO OFFER NOR CAPABLE OF OFFERING. THIS CON 9~USION IS FURTHER STRENGTHENED BY THE FACT THAT THE PREMISES ARE LEAS ED @ RS. 45,000/- PER MONTH FOR A PERIOD OF 36 MONTHS. THUS, OVER THE PER IOD OF LEAVE & LICENCE, THE APPELLANT WAS REQUIRED TO PAY RS. 26,20,000/-. AS AGAINST THIS, THE APPELLANT INCURRED RS. 95,81,077/- ON 'REFURBISHING '. ANY PRUDENT PERSON WOULD INCUR EXPENSE OF MORE THAN 600% OF 3 YEARS' R ENTAL VALUE OF A PREMISE ONLY IF THERE WAS SUBSTANTIAL NEW ADVANTAGE OR ADDI TION TO THE ORIGINAL ASSET. APPLYING THE RATIO LAID DOWN BY JURISDICTIONAL IT A T, THE TREATMENT ACCORDED BY ASSESSING OFFICER IS UPHELD. HOWEVER, IT IS ALSO NOTED THAT PART OF THE EXPENSES SUCH AS CABINETS, FURNITURE ETC., WERE INC URRED 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 AB OVE. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY AND ALLOW E XPENDITURE ON PURCHASE OF OFFICE FURNITURE. THIS GROUND IS PARTLY ALLOWED. 8. THE DISALLOWANCE OF ENTIRE BAD-DEBT WAS CONFIRMED B Y LD CIT(A) HOLDING AS UNDER: 5.3.1 ---------- ADDITION OF RS. 24,68,323/- ON A CCOUNT OF BAD DEBTS WRITTEN OFF. THE ASSESSING OFFICER HAS DISCUSSED THIS AT PA RA 6 OF HIS ORDER. HE HAS ENUMERATED THE ITEMS OF BAD DEBTS WRITTEN OFF AS PE R THE APPELLANT AT PARA 6.2 OF HIS ORDER. HE HAS FURTHER MADE CATEGORICAL OBSER VATION THAT THE APPELLANT HAS NOT ESTABLISHED THAT THE AMOUNTS WRITTEN OFF WE RE TAKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF THE PREVIOUS YEAR UND ER 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 AL SO, THE APPELLANT WAS NOTABLE TO ESTABLISH THAT THE AMOUNTS WRITTEN OFF W ERE TAKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF THE PREVIOUS YEAR UND ER CONSIDERATION OR ANY EARLIER PREVIOUS YEAR. UNDER THE CIRCUMSTANCES, I F IND NO NEED TO INTERFERE WITH THE FINDINGS OF THE ASSESSING OFFICER. THIS GR OUND OF APPEAL IS DISMISSED. ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 7 9. THUS, FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A) , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL. 10. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUN D NO.1 TO 3 RELATES TO DISALLOWANCE OF EXPENDITURE INCURRED ON ACCOUNT OF FURNITURE AND FIXTURES. THE LD. AR OF THE ASSESSEE FURTHER SUBMIT S THAT ASSESSEE- COMPANY ENTERED INTO AGREEMENT WITH LEAVE AND LICEN CE WITH TANTIA CHARITABLE TRUST ON 05.04.2008, AS SAID TRUST WAS I N POSSESSION OF THE PREMISES AT FLAT NO. 4CS NO. 72 AT LOWER PAREL, SIT ARAM MILLS COMPOUND, OPPOSITE SITARAM MILL, BMC SCHOOL, MUMBAI . AS THE AGREEMENT, THE ASSESSEE WAS ENTITLED TO CARRY OUT T HE REPAIR WORK IN THE TENANTED PREMISES TO PROVIDE ENOUGH WATER AND NEW C ONNECTION TO THE TENANTED PREMISES, PROVIDE/OBTAINED NEW BEST ELECTR ICITY CONNECTION FOR THE SAID PREMISES, SECURITY OF THE SAID PREMISES, G ETTING/PROVIDING PLASTERING AND PAINTING OF THE EXTERIOR OF THE BUIL DING, GENERAL BEAUTIFICATION OF COMPOUND. THE COPY OF LEAVE AND L ICENSE/ 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. AN D WOULD BE REPAIRED BY THE LANDLORD. HOWEVER, THE LANDLORD NOT CARRIED OUT ANY REPAIR. THE ASSESSEE COMPANY NEGOTIATED IN JULY 2008 WITH THE T RUSTEE OF THE TRUST ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 8 FOR ITS OFFICE USE AS A PHOTOGRAPHY STUDIO. IN THE NEGOTIATION, THE ASSESSEE WAS ASSURED THAT THERE WOULD BE NO DIFFICU LTY IN GETTING THE CHANGE OF USER FROM WAREHOUSE INTO A MODERN OFFICE. HOWEVER, NO PERMISSION WAS GRANTED, FOR CHANGE OF USER, THE ASS ESSEE COULD NOT USE THE TENANTED PREMISES. THE BMC SEALED THE TENANTED PROPERTY AND IT COULD NOT BE MADE USABLE NOR DID THE LANDLORD FULFI LL ITS OBLIGATION AND RESPONSIBILITIES UNDER THE LEASE FOR SUITABLE USER. THE TENANTED PREMISE WAS SEALED BY BMC WHICH PREVENTED THE ASSESSEE FROM FURTHER REPAIR. THE SAID PREMISES DESPITE MAKING EXPENDITURE REMAIN ED UNUSABLE AS THE BMC NEVER ALLOWED THE RENOVATION IN THE TENANTED PR EMISES. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENSES, H OWEVER, 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 RS. 1,86,831/-. 11. THE LANDLORD ALSO FILED A SUIT FOR RECOVERY OF REN T 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 CABINET S FURNITURE OR ITEMS THAT CONSTITUTE OF OFFICE FURNITURE AND DISALLOWANC E OF REMAINING EXPENDITURE WAS UPHELD. 12. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THE ASSESSING OFFI CER DISALLOWED THE ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 9 ENTIRE EXPENSES BY TAKING VIEW THAT THE ASSESSEE IN CURRED 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 T HE EXPENSES. THE LD. CIT(A) UPHELD THE ACTION OF ASSESSING OFFICER AS RE CORDED IN PARA-5.2.5 OF IMPUGNED ORDER AND GRANTED PART RELIEF TO THE AS SESSEE ON THE EXPENSES INCURRED ON CERTAIN ITEMS. WE HAVE NOTED THAT THE LOWER AUTHORITIES HAS NOT DISPUTED THAT ASSESSEE HAS OBTA INED A TENANTED PREMISES FOR RUNNING ITS BUSINESS FOR SETTING UP A STUDIO. FURTHER, THERE IS NO DISPUTE THAT THE PREMISES COULD NOT BE UTILIZ ED AS ITS USER FROM WAREHOUSE TO OFFICE PREMISES WAS NOT SANCTIONED BY BMC. MOREOVER, THE PREMISE WAS SEALED IN THE MONTH OF OCTOBER 2008 . THE LEAVE AND LICENCE AGREEMENT WAS EXECUTED ON 01.05.2008. THE A SSESSEE HAS CLAIMED EXPENSES WHICH CONSIST OF FURNITURE AND FIX TURE FIXING OF INTERIOR, INSTALLATION OF WATER AND ELECTRICITY CON NECTION, FENCING OF THE TENANTED PREMISES. THE LD AR FOR THE ASSESSEE FAIRL Y SUBMITTED THAT LD CIT(A) HAS GRANTED SUBSTANTIAL RELIEF TO THE ASSESS EE. WE HAVE NOTED THAT ORDER GIVING EFFECT TO THE ORDER OF LD CIT(A) IS NO T PLACED ON RECORD THE LD. AR OF THE ASSESSEE HAS FURNISHED THE BREAK-UP O F ALL THESE EXPENSES, DETAILS OF WHICH ARE AVAILABLE AT PAGE NO. 213 OF P APER BOOK. CONSIDERING THE FACTS OF THE PRESENT CASE, WE FIND MERIT IN THE SUBMISSIONS OF LD. AR OF THE ASSESSEE, THAT THE ASS ESSEE DESPITE INCURRING ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 10 HUGE EXPENDITURE COULD NOT USE THE TENANTED PREMISE S FOR ITS BUSINESS PURPOSE AND THE EXPENSES INCURRED BY THE ASSESSEE A RE 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 SA Y THAT BEFORE PASSING THE ORDER, THE ASSESSING OFFICER SHALL GRANT OPPORT UNITY 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 NAT URE OF REVENUE EXPENSES. THIS GROUND OF APPEAL IS CLAIMED BY ASSES SEE IN ALTERNATIVE OF GROUND NO.4 & 5. THE LD. AR OF THE ASSESSEE SUBMITS THAT THE LANDLORD OF THE TENANTED PREMISES FILED A SUIT FOR RECOVERY OF POSSESSION AND ARREARS OF RENT / LEAVES AND LICENCE FEES BEFORE THE CIVIL COURT. THE CIVIL COURT PASSED AN INTERIM ORDER AGAINST THE ASSESSEE FOR PA YMENT 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. TH E LD. AR FURTHER SUBMITS THAT THE ASSESSEE COULD USE THE TENANTED PR EMISES DESPITE ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 11 INCURRING HUGE EXPENSES AND THE LANDLORD RECOVERED THE RENT OR LEAVES AND LICENCE CHARGES, THEREFORE, THE ASSESSEE IS ENT ITLED FOR EXPENSES AS A REVENUE EXPENSES, IF NOT ALLOWED AS BAD-DEBT. 16. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 17. WE HAVE CONSIDERED THE SUBMISSION OF LD. REPRESENTA TIVE OF THE PARTIES AND PERUSED THE RECORD CAREFULLY. BEFORE THE ASSESS ING OFFICER, THE ASSESSEE CLAIMED THE AMOUNT OF RS. 24,68,323/- AS A BAD-DEBT, THE DETAILS OF WHICH WE HAVE RECORDED IN PARA-4 SUPRA. THE ASSE SSING OFFICER DISALLOWED THE CLAIM BY TAKING VIEW THAT SUIT FILED BY LANDLORD HAS NOT ATTAINED THE FINALITY. THE LD. CIT(A) UPHELD THE AC TION OF ASSESSING OFFICER HOLDING THAT THE ASSESSEE HAS NOT FULFIL TH E REQUIREMENT OF SECTION 36(2). BEFORE US, THE ASSESSEE IN ALTERNATIVE HAS C LAIMED THE AMOUNT AS REVENUE EXPENDITURE. CONSIDERING THE FACT THAT THE ASSESSEE HAS MADE THE PAYMENT BY THE ORDER OF CIVIL COURT AND THE FACT TH AT THIS PLEA IS RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME, THEREFORE, THIS GROUND OF APPEAL IS RESTORED TO THE FILE OF ASSESSING OFFICER TO VERIFY THE PAYMENT MADE BY THE ASSESSEE IN COMPLIANCE OF ORDER OF SMALL CAUSE COURT DATED 23.10.2015 AND GRANT APPROPRIATE RELIEF TO THE ASSE SSEE BEFORE GIVING EFFECT TO THE DIRECTION OF THIS ORDER, THE ASSESSIN G OFFICER IS DIRECTED TO GRANT OPPORTUNITY TO THE ASSESSEE. IN THE RESULT TH IS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 2824 MUM 2017-PHOTOLINK CREATIVE INDIA PVT. LTD. 12 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COU RT ON 15/11/2019. SD/- SD/- R.C. SHARMA PAWAN SI NGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 15.11.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR C BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI