TaxTMI 
TaxTMI 
2015 (12) TMI 353
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....Garments. Assessee filed its return of income and declared total income of Rs. 16,56,27,491/-. The assessment was completed u/s 143(3) of the Income-tax Act (Act) on 22/12/2010 determining taxable income of Rs. 17,37,54,026/-. AO had made two additions, Viz.: a) Disallowance of bad debts relating to write off of rental advance. b) 'Other income' not considered for allowing deduction u/s 80IB. 2.1 The grounds raised by the assessee in the appeal are as under: "1. The CIT (A) ought to have allowed Rs. 7,65,028/- as business expenses under sect ion 37 being the irrecoverable rent deposit made exclusively for the purpose of business and written off in the normal course of business. 2. The CIT (A) ought to ....
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....r in the last week of February, 2008 and the amount was written off in the month of March, 2008. He noted that as per the letter dated 20/02/08, Sri K. V. Sooriya Narayanan President (Corporate) and Company secretary, had called upon the said party to pay the balance security of Rs. 8,50,000 within 15 days, failing which legal action may be initiated. The AO observed that no information was furnished by the Assessee on further action taken for recovery of rental advance. He, therefore, disallowed the claim of the assessee to write off the unrecovered rental advance. 4. On appeal, before the CIT(A), the AR of assessee contended that the AO had not disputed that the amount of Rs. 7,65,028 being rent deposit was not recoverable. He submitte....
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....available in the records of the revenue. Hence, we permit the assessee to file additional evidence. 7.1 Ld. AR submitted that this property was taken on lease from 01/07/05 to 30/06/06 for the purpose of manufacturing garments. Under this agreement, assessee has paid security deposit of Rs. 30 lakhs as per the agreement filed. . Ld. AR drew our attention to lease covenants, point No. F of the lease agreement wherein lessee cannot assign, sublet or part of the demised premises or any part thereof except to their sister concerns. Ld. AR submitted that this lease was taken only for the purpose of business and paid rent for the same claiming it as revenue expenditure. It does not create any capital asset since the lease was conditional as en....
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....advance given by assessee whether a capital asset or revenue asset is created. As per the ratio laid down in the case of Triveni Engg. (supra), capital asset is created, not the revenue asset. The submissions made by the ld. AR relying on the other judgments; In the case of LG Soft India Pvt. Ltd. (supra), the assessee paid rent free advance to obtain permissive use or licence to use premises. This was not the case in the present appeal on hand. The Appollo case is not subject under consideration. Since the ratio laid down were, which reconfirms the provisions that write off of advance given for capital assets liable to be disallowed. Similarly, write off of advance given for revenue items was allowable as deduction u/s 37. The other decisi....
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....nsidered the other income of Rs. 22,56,743/- as eligible income u/s 80IB also. He opined that since such other income was not derived from the business of the assessee, the same was not eligible for claim of deduction u/s 80IB. The assessee contended that the other income was generated out of normal course of business. However, the AO did not accept the said contention opining that in view of various court pronouncements, other income is not to be considered as derived from the business. Accordingly, he computed the deduction u/s 80IB at Rs. 2,53,07,225 as against Rs. 2,59,84,248 claimed by the assessee and disallowed the excess claim of Rs. 6,77,023. 11. Before the CIT(A), it was submitted by assessee that the other income constituted r....
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....m the business of assessee. The CIT(A) confirmed the action of the AO. 16.1 The cases referred by the assessee and the ratios laid down in these judgments were, the assessee had done a process on the raw material which was nothing but a part and parcel of the manufacturing process of the industrial undertaking. The receipts like job work, scrap and labour charges could not be said to be independent income of the manufacturing activities of the undertaking of the assessee and, thus, could not be excluded from the profits and gains derived from the industrial undertaking for the purpose of computing deduction u/s 80IB. Those were gains derived from the industrial undertaking and so, entitled for the purpose of computing deduction u/s 80IB.....