Appeal details
Counselvise Citation
446419914 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-05-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
21-01-2015
Assessment Year
2006-2007
Appeal Filed On
02-07-2012
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , BEFORE SHRI R.C. SHARMA, ACCOUNTATN MEMBER AND SHRI VIJAYPAL RAO , JUDICIAL MEMBE R . / ITA NO . 4464 / MUM./ 2012 ( / ASSESSMENT YEAR : 200 6 07 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S M/S. RICOH INDIA LTD. 1201, 1 ST FLOOR, BUILDING NO.12 SOLITAIRE CORPORATE PARK ANDHERI GHATKOPAR LINK ROAD ANDHERI (E), MUMBAI 400 093 PAN AAACR4151J .... / RESPONDENT . / ITA NO .4465 / MUM./ 2012 ( / ASSESSMENT YEAR : 2007 08 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 3(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S M/S. RICOH INDIA LTD. 1201, 1 ST FLOOR, BUILDING NO.12 SOLITAIRE CORPORATE PARK ANDHERI GHATKOPAR LINK ROA D ANDHERI (E), MUMBAI 400 093 PAN AAACR4151J .... / RESPONDENT / ASSESSEE BY : S HRI R. SANTHANAM A/W SHRI SURESH MALIK / REVENUE BY : SHRI LOVE KUMAR / DA TE OF HEARING 29.04.2015 / DATE OF ORDER 29.05.2015 M/S. RICOH INDIA LTD. 2 / ORDER , / PER VIJAYPAL RAO , JUDICIAL MEMBER TH E PRESENT APPEAL S BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE IMPUGNED ORDER S DATED 15 TH FEBRUARY 2012, FOR THE ASSESSMENT YEAR 2006 07 AND ORDER DATED 21TH FEBRUARY 2012, FOR THE ASSESSMENT YEAR 2007 08, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 7, MUMBAI. 2. WE FIRST PROCEED TO ADJUDICATE THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006 0 7, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT (A) ERRED IN DELETING THE ADDITION OF' 4,46,029/ - , BEING SECURITY DEPOSITS PAID TO ELECTRICITY AUTHORITIES AND SALES TAX AUT HORITIES, WITHOUT APPRECIATING THAT ADVANCE GIVEN IS CAPITAL IN NATURE AND THE SAME CANNOT BE CLAIMED AS BAD DEBT AS PER THE PROVISIONS OF SEC. 36(2) R.W.S 36(1)(VII) . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CL'T (A) ERRED IN TREATING THE VALUE OF THE PROPERTY AT' 1,40,00,0001 - INSTEAD OF AT ITS STAMP VALUE OF' 3,07,71,0001 - , AS DONE BY THE AO ULS SOC, BY PLACING RELIANCE ON THE DECISION OFHON'BLE TRIBUNAL IN THE CASE OF ATUL G. PURANIK VS. I.T.O ITR (TRIB) 120, WITHOUT APP RECIATING THAT THE CASE RELIED UPON IS DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEE'S CASE IN AS MUCH AS IN THE CASE RELIED UPON THERE WAS TRANSFER OF LEASE RIGHTS FOR 60 YEARS IN THE PLOT AND NOT LAND ITSELF WHEREAS IN THE PRESENT CASE THE ASSESSEE IS HOLDING LAND ON LEASE DEED SIGNED WITH MIDC WHICH IS SOLD FOR RS. 1,40,00,000 / - THEREBY ATTRACTING THE PROVISIONS OF SEC. 50C . 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . M/S. RICOH INDIA LTD. 3 3. GROUND NO.1, IS REGARDING DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SECURITY DEPOSIT WITH MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) AND SALES TAX AUTHORITIES. 4. THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, NOTED THAT TH E ASSESSEE HAS INTER ALIA CLAIMED ` 1,15,333, MADE TOWARDS SECURITY DEPOSIT WITH MSEB AND ` 3,30,696, WITH THE SALES TAX DEPARTMENT. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THESE DEPOSITS SHOULD NOT BE DISALLOWED. THE ASSESSEE CLAIMED THAT THE A SSESSEE HAS SOLD THE FACTORY AND, THEREFORE, THESE AMOUNTS BECOME IRRECOVERABLE AND ACCORDINGLY, THE ASSESSEE HAD WRITTEN OFF THESE DEPOSITS AND CLAIMED THE SAME AS BUSINESS LOSS. THE ASSESSING OFFICER DID NOT ACCEPT THIS SUBMISSION OF THE ASSESSEE AND DIS ALLOWED THE CLAIM OF WRITTEN OFF THIS AMOUNTS ON THE GROUND THAT IT DOES NOT SATISFY THE CONDITIONS OF SECTION 36(2) AND FURTHER, THE ASSESSEE FAILED TO PROVE THAT THE DEPOSIT HAS BECOME BAD. 5. ON APPEAL, THE LEARNED CIT(A) HAS ALLOWED THE CLAIM OF THE ASSE SSEE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE DEPOSIT MADE WITH THE GOVERNMENT DEPARTMENTS AS IRRECOVERABLE DEPOSITS AND WRITTEN OFF THE SAME. HE FURTHER CONTENDED THAT THE ASSESSEE HAS NOT PRODUCED ANY RECORD TO M/S. RICOH INDIA LTD. 4 ESTABLISH THAT THE AMOUNTS IN QUESTION BECOME IRRECOVERABLE. HE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINC E THE ASSESSEE HAS SOLD ITS NASIK PLANT AND PREMISES, THEREFORE, THE ELECTRICITY CONNECTION AT THE FACTORY PREMISES WAS NO MORE WITH THE ASSESSEE AND, ACCORDINGLY, SECURITY DEPOSIT WITH THE MSEB HAS BEEN WRITTEN OFF BY THE ASSESSEE AS IRRECOVERABLE. SIMILA RLY, THE DEPOSIT WITH THE SALES TAX DEPARTMENT HAS BEEN WRITTEN OFF BY THE ASSESSEE BECAUSE THE ASSESSEE HAS SOLD ITS FACTORY AND THE SAID DEPOSIT CANNOT BE USED BY THE ASSESSEE FOR BUSINESS PURPOSE. HE HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICT IONAL HIGH COURT IN HARSHAD J. CHOKSY V/S CIT, [2012] 349 ITR 250 (BOM.) AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS ALLOWED THE CLAIM AS BUSINESS LOSS EVEN IF THE SAME IS NOT BEEN ALLOWABLE AS BAD DEBT. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND THE RELEVANT MATERIAL ON RECORD. THE QUESTION ARISES WHETHER THE DEPOSITS MADE BY THE ASSESSEE WITH MSEB AND SALES TAX DEPARTMENT CAN BE TREATED AS NON RECOVERABLE AMOUNT AND, CONSEQUENTLY, THE SAME CAN BE ALLOWED AS BUSINESS LOSS UNDER SECTION 28 OR 37(1) OF THE ACT ON BEING WRITTEN OFF BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE TWO AMOUNTS BEING DEPOSITS WITH THE GOVERNMENT DEPARTMENT CANNOT BE TREATED AS BAD DEBT OR THE AMOUNTS BECOME IRRECOVERABLE. EV EN OTHERWISE WHEN THE M/S. RICOH INDIA LTD. 5 ASSESSEE HAS SOLD ITS FACTORY WHERE THIS ELECTRICITY CONNECTION WAS INSTALLED, THEN THE DEPOSIT WITH THE MSEB IS PART OF THE SALE CONSIDERATION OF THE FACTORY PREMISES. WE DO NOT AGREE WITH THE FINDINGS OF THE LEARNED CIT(A) AS WELL A S THE CONTENTION OF THE ASSESSEE THAT SINCE THE ASSESSEE HAS SOLD THE BUSINESS PREMISES / FACTORY AND, THEREFORE, THE AMOUNT OF SECURITY DEPOSITS WITH THE MSEB AND SALES TAX DEPARTMENT BECOME IRRECOVERABLE. IF THE ASSESSEE DECIDED TO DISCONNECT THE ELECTRI CITY CONNECTION AND TAK E BACK THE SECURITY DEPOSIT AMOUNT, THEN THERE IS NO IMPEDIMENT IN THE RIGHT OF THE ASSESSEE TO RECEIVE BACK THE AMOUNT. IT APPEARS THAT THE ASSESSEE HAS TRANSFERRED THE FACTORY PREMISES ALONG WITH THE ELECTRICITY CONNECTION. THEREFO RE, NO SEPARATE CLAIM OF BUSINESS LOSS ON ACCOUNT OF SECURITY DEPOSIT OF ELECTRICITY CONNECTION IS ALLOWABLE WHEN THE SAME IS TRANSFERRED ALONG WITH THE FACTORY PREMISES. SIMILARLY, THE DEPOSIT WITH THE SALES TAX DEPARTMENT CANNOT BE TREATED AS IRRECOVERAB LE AMOUNT. MERELY BECAUSE THE ASSESSEE DECIDED TO WRITTEN OFF THESE AMOUNTS IN THE BOOKS OF ACCOUNT WOULD NOT AUTOMATICALLY BECOME AN ALLOWABLE DEDUCTION BEING BUSINESS LOSS. WE FURTHER NOTE THAT FOR THE ASSESSMENT YEAR 2007 08, THIS CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED BY THE LEARNED CIT(A) AND THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE DISALLOWANCE MADE BY THE LEARNED CIT(A). CONSEQUENTLY, THE ORDER OF THE LEARNED CIT(A) QUA THIS ISSUE IS SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER IS RES TORED. M/S. RICOH INDIA LTD. 6 9. GROUND NO.2, IS REGARDING THE APPLICABILITY OF SECTION 50C, IN RESPECT OF THE SALE OF LEASE HOLD PROPERTY. 10. THE ASSESSEE HAS SOLD THE FACTORY WHICH IS ON THE LEASE HOLD PLOT FOR ` 1.40 CRORES AND OFFER ED CAPITAL GAIN. THE ASSESSING OFFICER ADOPTED FULL VALUE CONSIDERATION AS DETERMINED BY THE STAMP DUTY AUTHORITY AT ` 3,07,71,000. THE ASSESSING OFFICER HAS ALSO REFERRED THE VALUATION OF THE PROPERTY TO THE DVO WHO HAS VALUED THE PROPERTY AT ` 2,05,96,600. HOWEVER, THE ASSESSING OFFICER HAS CONSIDERE D THE FULL SALE CONSIDERATION BY ADOPTING THE STAMP DUTY VALUATION FOR THE PURPOSE OF WORKING OUT THE CAPITAL GAIN. 11. BEFORE THE LEARNED CIT(A), THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER AND QUESTIONED THE APPLICABILITY OF SECTION 50C IN C ASE OF LEASE HOLD RIGHTS. THE LEARNED CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND HELD THAT PROVISIONS OF SECTION 50C, IS NOT APPLICABLE IN ASSESSEES CASE WHERE THE ASSESSEE HAS SOLD THE LEASE HOLD RIGHTS. THE LEARNED CIT(A) HAS FOLLOWED THE DECISIO N OF THE TRIBUNAL , MUMBAI BENCH, IN ATUL G. PURANIK V/S ITO, ITA NO.3051/MUM./2010, ORDER DATED 13 TH MAY 2011. 12. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THERE IS NO DIFFERENCE IN THE TITLE OF THE PROPERTY IN QUESTION BEING THE LAND, THEREFORE, THE PROVISIONS OF SECTION 50C, ARE M/S. RICOH INDIA LTD. 7 APPLICABLE IN THE CASE OF ASSESSEE. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 13. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE LEASE HOLD RIGHTS CANNOT BE EQUATED WITH T HE OWNERSHIP OF TH E LAND AND, THEREFORE, THE DEEMED PROVISIONS OF SECTION 50C, CANNOT BE APPLIED IN CASE OF TRANSFER OF LEASE HOLD RIGHTS. HE HAS RELIED UPON THE FOLLOWING DECISIONS: I) ITO V/S PRADEEP STEEL RE ROLLING MILLS PVT. LTD., [2013] 155 TTJ 294 (MUM.); II) ATUL G. PAURANIK V/S ITO, ITA NO.3051/MUM./2010, ORDER DATED 13 TH MAY 2011; AND III) SHRI HEMANT R. TANDEL, ITA NO.1934, 1835, 1935, 1836, 1941, 1837/MUM./2012, ORDER DATED 16 TH APRIL 2015 14. WE HAVE CONSIDERED THE RIVAL CONTEN TIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT WHAT IS TRANSFERRED BY THE ASSESSEE IS THE LEASE HOLD PROPERTY AND, THEREFORE, UNTIL AND UNLESS THE PROPERTY IS CONVERTED INTO FREE HOLD THE LESSEE HOLDS ONLY LEASE HOLD RIGHTS OVER THE PROPERTY. IN TH E CASE OF ITO V/S PRADEEP STEEL RE ROLLING MILLS PVT. LTD., THE TRIBUNAL, WHILE DEALING WITH AN IDENTICAL ISSUE, HAS HELD AS UNDER: 4. THE REVENUE IS IN APPEAL. WE ARE UNABLE TO FIND FAULT WITH THE DECISION OF THE CIT(A) THAT SECTIO N SAC CANNOT BE INVOKED TO A TRANSFER OF LEASEHOLD RIGHTS. THE SECTION APPLIES ONLY TO CAPITAL ASSETS BEING LAND OR BUILDING OR BOTH. IT DOES NOT IN TERMS INCLUDE LEASEHOLD RIGHTS IN THE LAND OR BUILDING WITHIN ITS SCOPE. THE ASSESSING OFFICER'S M/S. RICOH INDIA LTD. 8 CONCLUSION TO THE CONTRARY IS BASED ON SECTION 27(IIIB) OF THE ACT, WHICH SAYS THAT A PERSON WHO ACQUIRES ANY RIGHTS, EXCLUDING ANY RIGHTS BY WAY OF A LEASE FROM MONTH TO MONTH OR FOR A PERIOD NOT EXCEEDING ONE YEAR, IN OR WITH RESPECT TO ANY BUILDING OR PART THEREO F, BY VIRTUE OF ANY SUCH TRANSACTION AS IS REFERRED TO IN CLAUSE (F) OF SECTION 269UA, SHALL BE DEEMED TO BE THE OWNER OF THAT BUILDING OR PART THEREOF. FIRSTLY, THIS PROVISION HAS BEEN EXPRESSLY LIMITED IN ITS APPLICATION TO SECTIONS 22 TO 26 OF THE ACT, WHICH DEAL WITH THE COMPUTATION OF THE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. IT HAS NOT BEEN MADE APPLICABLE TO THE COMPUTATION OF CAPITAL GAINS. SECONDLY, THE RIGHTS MENTIONED IN THE PROVISION ARE RIGHTS OVER THE BUILDING AND ANY RIGHTS OVER THE LAND HAVE NOT BEEN INCLUDED IN THE SECTION. IN ANY CASE, SINCE THE SECTION 27(IIIB) HAS NOT BEEN EXTENDED TO THE COMPUTATION OF CAPITAL GAINS UNDER SECTION 45 AND IS LIMITED TO THE COMPUTATION OF THE INCOME UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', THE CONCLUSION OF THE CIT(A) THAT SECTION SAC CANNOT BE INVOKED WHERE LEASEHOLD RIGHTS IN LAND OR BUILDING ARE TRANSFERRED, SEEMS TO US, TO BE CORRECT. WE ACCORDINGLY AFFIRM THE DECISION OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE WITH NO OR DER AS TO COSTS. 15. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN ATUL (SUPRA) AS WELL AS IN THE CASE OF SHRI HEMANT R. TANDEL (SUPRA). FOLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LEARNED C IT(A) QUA THIS ISSUE. 16. 2006 - 07 16. IN THE RESULT, REVENUES APPEAL FOR THE A.Y. 2006 07 IS PARTLY ALLOWED . WE NOW TAKE UP REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007 08, VIDE WHICH, FOLLOW ING GROUNDS HAVE BEEN RAISED: M/S. RICOH INDIA LTD. 9 A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT (A) ERRED IN DELETING THE ADDITION OF ` 4,18,056/ BEING DEDUCTION CLAIMED ON ACCOUNT OF ADVANCE WRITTEN OFF IN RESPECT OF TENDER AMOUNT DUE FROM T HE GOVERNMENT, WITHOUT APPRECIATING THAT ADVANCE GIVEN IS CAPITAL IN NATURE AND THE SAME CANNOT BE CLAIMED AS BAD DEBT AS PER THE PROVISIONS OF SEC. 36(2) R. W.S 36(I)(VII). B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF' 2,87,353/ - , BEING ADVANCES WRITTEN OFF IN RESPECT OF OLD/EX - EMPLOYEES BALANCES APPEARING IN THEIR IMPRESSED/ADVANCES ACCOUNTS, WITHOUT APPRECIATING THAT THERE IS NO EVIDENCE FURNISHED BY THE ASSESSEE TO SHOW THAT THE AMOU NT HAS BEEN OFFERED TO TAX IN EARLIER YEARS AS PER THE PROVISIONS OF SEC. 36(2). C) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING' 3,75,888/ - , BEING DEPOSITS MADE TO EGIL, WITHOUT APPRECIATING THAT THER E IS NO EVIDENCE FURNISHED BY THE ASSESSEE TO SHOW THAT THE AMOUNT HAS BEEN OFFERED TO TAX IN EARLIER YEARS AS PER THE PROVISIONS OF SEC. 36(2). 17. GROUND NO.1(A) IS REGARDING DEDUCTION CLAIMED ON ACCOUNT OF DISALLOWANCE WRITTEN OFF IN RESPECT OF THE TENDER AMOUNT DUE FROM THE GOVERNMENT. 18. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS THE MATERIAL ON RECORD. SINCE THIS WAS A DEPOSIT WITH THE GOVERNMENT, THEREFORE, THE SAID AMOUNT CANNOT BE TREATED AS EITHER BAD DEBT OR IRRECOVERABLE AMOUNT. IN VIEW OF OUR FINDINGS GIVEN ABOVE ON THE SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2006 07 REGARDING DEPOSITS WITH THE MSEB AND SALES TAX DEPARTMENT, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) QUA THIS ISSUE AND RESTORE THE ORDER OF THE ASSESSING OFFICER. M/S. RICOH INDIA LTD. 10 19. GROUND NO. 1(B), IS REGARDING DEDUCTION CLAIMED ON ACCOUNT OF ADVANCE WRITTEN OFF IN RESPECT OF OLD / EX EMPLOYEES BALANCE. 20. THE ASSESSEE CLAIMED DEDUCTION, INTER ALIA, IN RESPECT OF THE AMOUNT OF ` 4,18,056, WRITTEN OFF TOWARDS EARNEST MONEY DEPOSIT FOR LEASED PREMI SES FOR THEIR EMPLOYEES. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THIS EXPENDITURE HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND FURTHER IT DOES NOT FULFILL THE CONDITION PRESCRIBED UNDER SECTION 36(2)(I) OF THE ACT. 21. ON APPEAL, THE LEARNED CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ADVANCE WAS DEPOSITED FOR THE PURPOSE OF HIRING THE ACCOMMODATION FOR T HE EMPLOYEES OF THE ASSESSEE, THEREFORE, IT DOES NOT FULFILL THE CONDITIONS AS PRESCRIBED UNDER SECTION 36(2). FURTHER, THE ASSESSEE HAS NOT PROVED THAT THIS AMOUNT HAS BECOME IRRECOVERABLE. 23. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORT ED THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE AMOUNT WAS PAID FOR PROCURING THE ACCOMMODATION FOR THE EMPLOYEES WHO HAVE ALREADY LEFT THE SERVICES OF THE ASSESSEE, THEREFORE, NOW THIS M/S. RICOH INDIA LTD. 11 AMOUNT HAS BECOME IRRECOVERABLE AND IS ALLOWABLE DEDUCTION A S BUSINESS LOSS. 24. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS THE MATERIAL ON RECORD. WE FIND THAT THE LEARNED CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDERS OF THE TRIBUNAL AS WELL AS THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN IBM WORLD TRADE CORPORATION V/S CIT , [1990] 186 ITR 412 (BOM.) , WHEREIN THE HIGH COURT HAS HELD AS UNDER: THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE FACT THAT THE PRESENT CASE THE AMOUNTS HAVE BEEN ADVANCED TO THE LANDLORD IN PUR SUANCE OF THE AGREEMENT BEFORE THE EXECUTION OF THE LEASE DEED WOULD MAKE ANY DIFFERENCE. IN OUR OPINION, IT WILL NOT. IT IS NOT DISPUTED THAT T HE ASSESSEE REQUIRED FACTORY PREMISES FOR ITS BUSINESS AND THAT IT DID NOT GET READY FACTORY FOR THAT PUR POSE. IT TOOK A BUSINESS DECISION TO ENTER IN AGREEMENTS WITH THE LANDLORD WHO OWNE D THE LAND WHICH DID NOT HAVE THE FACTORY SHED AND OTHER STRUCTURES REQUIRED BY THE ASSESSEE. THE LANDLO RD EXPRESSED DIFFICULTY IN CONSTRUCTING THE FACTORY BUILDING AND OTH ER ST RUC TURES. THE ASSESSEE, IN PURSUANCE OF OTHER AGREEMENTS ENTERED IN ADVANCED MONEYS WHICH WERE IN THE BEGINNING TO BE ADJUSTED AGAINST T HE FUTURE RENTS, BUT SUBSEQUENTLY WERE AGREED TO BE REFUNDED TO THE ASSESS ON A FIXED DATE. IT IS TRUE THAT IF THE LANDLORD HAD FAILED TO CONSTRUCT T, FACTORY BUILDING AND OTHER STRUCTURES AS AGREED TO, THE AGREEMENTS WOU LD HAVE FALLEN THROUGH AND THERE WAS NO PENALTY CLAUSE AS SUCH. HOWEVER, ONE CANNOT GET AWAY FROM THE FACT THAT ALL THIS WAS DONE BY THE ASSESSEE WI TH A VIEW TO ACQUIRE THE FACTORY PREMISES ON LEASE. THE MERE FACT THAT THE FA C TORY WOULD BE READY IN A YEAR OR SO WOULD NOT MAKE ANY DIFFERENCE. WE ARE IN AGREEMENT WITH SHRI DASTUR THAT THE PRINCIPLES IN THIS REGA RD ARE LAID DOWN BY THE SUPREME COURT IN ITS JUDGMENT IN CIT V. MYSORE SUGAR CO. LTD. [1962] 46 ITR 649. THE RELEVANT OBSERVATIONS IN THIS C ASE HAVE ALREADY BEEN NOTED BY US EARLIER IN EMPIRE JUTE CO. LTD. V. C IT, [1980] 124 ITR 1 (SC). APART FROM THE FACT THAT THIS COURT HAD ALREADY HE LD THAT T HE LENGTH OF THE LEASE AGREEMENT IS NOT VERY M ATERIAL FOR THE PURPOSE OF DETERMINING THE NATURE OF THE EXPENDIT URE INCURRED ON LEASE AGREEMENT, THE SUPREME COURT HAS CLEARLY LAID DOWN IN EMPIRE JUTE CO. LTD. [198 0] 124 ITR 1, THAT EVEN ASSUMING THAT A LEAS E FOR A PERIOD OF 10, 15 OR 20 YEARS WOULD AMOUNT TO AN ADVANTAGE OF ENDURING NATURE, IT IS M/S. RICOH INDIA LTD. 12 NOT THAT EVER Y ADVANTAGE OF ENDURING NATURE WOULD RESULT IN A CAPITAL OUTLAY. WHAT I S REQUIRED TO BE SEEN IS WHETHER THE ADVANTAGE OF ENDURING NATURE IS IN TH E CAP ITAL FIELD. AS THE ACQUISITION OF PREMISES ON LEASE WOULD NOT ORDINARIL Y ; BE IN THE CAPITAL FIELD, WE HAVE NO HESITATION IN HOLDING THAT THE MONEY S ADVANCED BY THE ASSESSEE IN PURSUANCE OF THESE AGREEMENTS TO THE LANDLOR D FOR THE PURPOSES OF AND IN CONNECT ION WITH THE ACQUISITION OF THE PREMISE S ON LEASE WERE FOR THE PURPOSE OF BUSINESS. NATURALLY, THEREFORE, WHEN SU CH ADVANCES ARE LOST TO THE ASSESSEE, THE LOSS WOULD BE A BUSINESS LOSS AND NO T A CAPITAL LOSS. THE DECISIONS RELIED UPON BY DR. BALASUBRAMANIA N, ACCORDIN G , TO US, HAVE NO BEARING ON THE QUESTION INVOLVED HEREIN. IN THE SUPREME COURT DECISION, THE QUESTION WAS OF A THIRD PARTY'S LIABILITY TO PAY ESTAT E DUTY AND THE DISCHARGE BY AN ASSESSEE. IT WAS OBVIOUSLY A PURPOSE UNCONNECTED WITH THE BUSINESS OF THE ASSESSEE. THE OTHER TWO DECISIONS, VIZ. UTTAR BHARAT EXCHANGE LTD. V. C[T [1965) 55 ITR 550 (PUNJ) AND TA J MAHAL HOTEL V. C I T [1967) 66 ITR 303 (AP) REFER TO THE EXPENDITU RE INCURRED BY AN ASSESSEE ON ALTERATIONS AND ADDITIONS MADE BY AN ASSESSE IN LEASEHOLD PREMISES. NO DOUBT, SUCH EXPENDITURE WAS HELD TO BE OF CAPITA L NATURE. WE FAIL TO UNDERSTAND HOW THOSE DECISIONS HAVE ANY BEARING ON T HE POINT IN ISSUE BEFORE US. HAVING REGARD TO THE ABOVE DISCUSSION, THE QUESTION POSED BEFORE US IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. NO O R DER AS TO COSTS. 25. FOLLOWING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT CITED SUPRA, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LEARNED CIT(A) QUA THIS ISSUE. THIS GROUND IS THUS DISMISSED. 26. GROUND NO.1(C), IS REGARDING DEDUCTION ON ACCOUNT OF WRITTEN OFF AMOUNT BEING DEPOSIT MADE TO EGIL. 27. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS WELL AS THE MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED DEDUCTION OF ` 3,75,880, WRITTEN OFF ON ACCOUNT OF DEPOSIT MADE FOR AN OLD PREMISES BY EGIL WHICH WERE MERGED WITH THE ASSESSEE AND SUBSEQUENTLY THE AMOUNT WAS IDENTIFIED AS IRRECOVERABLE AFTER THE MERGER. IN VIEW OF OUR FINDINGS GIVEN GROUND M/S. RICOH INDIA LTD. 13 NO.1(B) ABOVE, WE DECIDE THIS ISSUE IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE. 28. 2006 - 07 2007-08 28. IN THE RESULT, REVENUES APPEAL S FOR THE A.Y. 2006 07 AND 2007 08 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 29.5.2105 SD/ - . . R.C. SHARMA ACCOUNTANT MEMBER SD/ - , VIKAYPAL RAO JUDICIAL MEMBER MUMBAI, DATED : 29.5.2015 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE REVENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
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