TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 1387
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....it was given towards hotel building construction which is in the nature of capital expenditure and write off on that account cannot be allowed as deduction. He submitted that various case laws relied on by the assessee's counsel before the lower authorities were distinguishable and assessee's case would not fit into the ratio laid down in those decisions. He relied on the orders of the lower authorities. 4. We have heard both the parties and perused the material on record. In this case, the assessee advanced money for the purpose of purchase of material to construct the hotel building. The assessee neither received the goods on this behalf or received that amount back from the respective persons. On this ground, it was written off by the assessee and same was claimed u/s. 37 of the Act. 5. Section 37(1) is a residuary provision wherein any expenditure laid out or expended wholly and exclusively for the purpose of business or profession, shall be allowed provided such expenditure is not the one indicated in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee. Section 37(1) being a residuary provision, it cannot be taken aid of ....
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....he case of Triveni Engineering & Industries Ltd., 343 ITR 245 (Del), it was held that loss on account of non-recovery of rent deposit was not in the nature of revenue loss allowable as a deduction and hence writing off the same on account of non-recovery would be a capital loss not allowable as a deduction. 8. Further in the case of Badridas Daga v. CIT, 34 ITR 10 (SC), the Supreme Court held that, "The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and to be incidental to it. If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act.". 9. Thus, it is clear from the above that the amount paid to various vendors for supply of construction material for construction of hotel building was not in the normal course of business of assessee. Since the amount was given for the purpose of creation of capital asset, the same cannot be treated as a revenue ....
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....ll be towards the cost of carrying out rebranding works. In clause-24.2 of the agreement it was provided that in case of breach of any obligations under the agreement, the assessee shall pay back the incentives as a gross amount after deducting any taxation as per the law. Clause 24.3 gives the schedule of percentage of repayment after 5 years of the agreement which is 100% after the expiry of 5th operating year and goes on upto 10th operating year. Clause - 24.3 is as follows: "Clause - 24.3 Notwithstanding any other term of this Agreement, if the Agreement is terminated before the expiry of ten (10) full Operating Years, Owner will. upon such termination, repay to Manager a portion of the incentive received by Owner as at the dare of termination (free of interest) determined as follows: Termination Year Percentage of Incentive to be repaid From the date of the Agreement to the expiration of the 5th Operating Year 100% During the 6th Operating Year 80% During the 7th Operating Year 60% During the 8th Operating Year 40% During the 9th Operating Year 30% During the 10th Operating Year 0% 14. The assessee contended that since the amount given by IHG, Gurgaon....
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....e instant case the assessee has received the entire amount in the first year of the agreement i.e. F.Y. 2009- 10 corresponding to A.Y. 2010-11. The assessee has also claimed expenditure on this amount, thus the amount received by the assessee certainly takes the character of income in this very year. The contention of the assessee that there is likelihood of repaying the amount in a phased manner after fifth operating year in case the agreement is prematurely terminated, doesn't help the assessee for treating the amount of incentive received as mere liability. The amount is accrued during the year under consideration, the expenses of Rs.1,11,12,359/- have been incurred in this very year between the period 01.12.2009 to 31.03.2010. Further as per the financial statement submitted for F.Y.2014-15 it is also evident that the agreement has not been prematurely terminated. In view of the above the addition of Rs.1,15,45,000/- treating as revenue receipt by AO is sustained by the CIT(Appeals). As against this, the assessee is in appeal before us. 18. We have heard both the parties and perused the material on record. The main contention of the ld. AR is that as per Note No.9 to the A....