Case Law Details
ACIT Vs Benetton India Pvt. Ltd. (ITAT Delhi)
The assessee submitted that the advances written off is not a capital loss as it is written off as security deposits against the shops obtained on rent. Such write off of security deposits was incidental to the business of the assessee and was for running its operations. It was argued that when the security deposits was forfeited by the lessors, the same had become loss for the assessee, therefore, the same has been claimed as a business expenditure in the books of accounts. He relied on a number of judgments holding that any expenditure incurred in connection with the acquisition of premises on lease should be held to be for the purpose of business of the assessee.
The ld. DR argued that this expense being capital in nature should not be allowed to be written off in the books of accounts and claimed in P&L account. He relied on the judgment of the Hon’ble Delhi High Court in the case of Triveni Engineering in ITA No.56 of 2009 vide order dated 14.09.2010 and the order of the Co-ordinate Bench of ITAT Delhi in the case of Raj Khosla in ITA No. 6581/Del/2016 vide order dated 06.07.2018.
Hon’ble Supreme Court in the case of Badridas Daga vs. CIT (34 ITR 10) Calcutta Co. Ltd. vs. CIT (37 ITR 1) held that “the profit to be assessed are the real profits and they must be ascertained on ordinary principles of commercial training and commercial accounting. The profit should be computed after deducting losses and expenditure incurred for the purposes of business unless such losses or expenditure are expressly, or by necessary implication, disallowed by the Act.”
Hon’ble Supreme Court in the case of CIT vs. Nainital Bank Ltd., 55 ITR 707 (SC) held that “under section 28, the trading loss of a business is deductible in computing the profits earned by a business. However, every loss is not deductible unless it is incurred in carrying out the operation of the business and is incidental to the operation. Whether loss is incidental to the operation of a business or not, is a question of fact to be decided on facts of each case, having regard to the nature of the operation carried on and the nature of risk involved in carrying them out. The degree of the risk or its frequency is not much relevant but its nexus to the nature of the business is material.”
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person who taken deposit , how his deposit income is treated . his rent income , business income or speculative income