2016 (11) TMI 880 - AT - Income Tax

Tribunal orders deletion of disallowed business expenses, emphasizes need for details and cites legal precedents.

The Tribunal directed the Assessing Officer to delete the disallowance of business expenses totaling Rs. 34,970 due to lack of details provided before the ... Addition made towards sundry balances written off - Held that:- As find that assessee has initially not produced any details before the Assessing Officer but it was produced only before the CIT(A) and CIT(A) has not entertained these details in the absence of proper explanation. In our considered view, as these details were not there before the Assessing Officer, it should go back to the Assessing Officer for afresh adjudication and the assessee should produce all these details before the Assessing Officer, especially when it was contested that these amounts were already offered as income and by this addition it will be a double taxation. Thus, we restore the matter to the file of Assessing Officer who shall examine the claim of assessee afresh in accordance with law after providing assessee adequate opportunity of being heard. Regarding the amount written off paid to Federal Express India (P) Ltd. towards courier charges, we do not find a valid reason for not allowing such write off when such expenses were incurred for business of the assessee which is not in dispute. Hence, we direct the Assessing Officer to delete the disallowance Disallowance of deposits written off - business loss or bad debts -Held that:- Security deposit which was written off by the assessee should be allowed as business loss. Thus, we direct the Assessing Officer to delete the addition. See case of Fab India Overseas P. Ltd. vs. ACIT [2013 (9) TMI 301 - ITAT DELHI ]wherein held that the above loss is a business loss ;for the reason that the assessee has taken on lease many premises spread over many parts of the country, and this act of taking this show room on lease is in the normal course of business. Issues:Disallowance of business expensesDisallowance of sundry balances written offDisallowance of deposits written offDisallowance of Business Expenses:The appeal concerns the disallowance of business expenses totaling Rs. 34,970 by the CIT(A) for the Assessment Year 2010-11. The Assessing Officer added Rs. 34,750 as the assessee failed to explain the write-off in the books of account. Additionally, Rs. 6,51,852 was disallowed as it was considered an advance deposit and not a bad debt. The CIT(A) upheld these additions. The assessee argued that certain amounts had already been offered as income, resulting in double taxation. The Tribunal decided to send the matter back to the Assessing Officer for fresh adjudication as the details were not provided before the Assessing Officer, especially considering the claim of double taxation. The Tribunal directed the Assessing Officer to delete the disallowance of Rs. 4,499 paid to a courier company as these expenses were incurred in the course of business.Disallowance of Sundry Balances Written Off:The assessee contended that sundry balances written off were credit balances already offered as income, leading to potential double taxation. Regarding Rs. 4,499 written off as payment to a courier company, the Tribunal found no valid reason for disallowance as these were legitimate business expenses. The Tribunal instructed the Assessing Officer to re-examine the claim after the assessee provides all details, especially in light of the potential double taxation issue.Disallowance of Deposits Written Off:The Tribunal considered the deposits written off amounting to Rs. 6,51,852 given to lessors towards rental deposit. Citing a similar case before the Delhi Bench, the Tribunal allowed the claim as a business loss. Referring to legal precedents, the Tribunal held that the loss of security deposit should be treated as a business loss, not a bad debt, as it was incurred in the normal course of business operations. Consequently, the Tribunal directed the Assessing Officer to delete the addition of Rs. 6,51,852 written off by the assessee.This comprehensive analysis of the judgment highlights the issues of disallowance of business expenses, sundry balances written off, and deposits written off, providing detailed insights into the arguments presented, decisions made by the authorities, and the final rulings by the Tribunal.