2023 (2) TMI 1001

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.... not recovered. 3. Briefly stated, the facts of the case are that the assessee is a company engaged in providing IT enabled services and BPO services. A sum of Rs.9,45,000/- was claimed as deduction in the Profit and loss account towards security deposit written off. On being called upon to justify the deduction, the assessee submitted that it entered into an Agreement with M/s. Adwitya Projects in the year 2010 for taking on lease certain premises at Sakal Nagar, Aundh, Pune. The assessee furnished a security deposit of Rs.15.00 lakh, being, rent equivalent of five months. The licensor permitted the assessee-licensee to use this property for 36 months, i.e., till 31-01-2013. However the licensor approached the assessee in April, 2011 fo....

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....n the preceding assessment year without paying rent and the licensor deducted the equivalent amount of such rent from the security deposit at the time of its refund in the year under consideration. Thus, it is not a case of security deposit ceasing to be refundable and becoming loss, rather adjustment of security deposit against the period for which the assessee used the premises without paying any rent. In such circumstances, the assessee cannot claim deduction in respect of non-refunded security deposit during the year under consideration as a business loss. Since the deduction by the licensor was in lieu of the rent for three months of the A.Y. 2012-13 for which the assessee used the premises without paying any rent, we direct to grant d....

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....banded during the year under consideration. On discontinuing the work on such modules, the amount capitalized towards salary of developer and computer rent allocated to developer, was claimed as deduction by writing off Rs.5.33 lakh. The detail of expenses written off has not been disputed by the AO. This shows that the assessee had capitalized certain revenue costs in respect of certain modules which it was trying to use in the software development business, but abandoned them during the year under consideration. Costs incurred earlier on such modules, which are otherwise of revenue nature, cannot be treated as capital expenditure, incapable of deduction on their write off. It is not a case where the assessee purchased certain plant and ma....