342. Security deposited with postal authorities for telex connection – Whether admissible as business expenditure
1. It has been brought to the notice of the Board that, as per an amendment made in the Indian Telegraph Rules with effect from 26-2-1983, a subscriber for a telex connection (either for existing one or a new one) is required to pay Rs. 10,000 towards security deposit to cover a part of the cost of the departmental equipment installed at the premises of the subscriber which will also protect the Postal Department against any unpaid dues by the subscriber. It has been urged that the said amount of security deposit may be allowed as a bona fide business expenditure for the year in which the said amount is paid on the same lines as the initial payment for a telephone connection under the ‘Own Your Telephone’ Scheme.
2. The matter has been examined and the Board are of the opinion that since the said deposit of Rs. 10,000 for a telex connection does not earn any interest when the telex machine is installed, at that stage, this amount may be treated as a revenue expenditure allowable as a deduction, if the assessee makes such a claim. However, when the amount is returned by the postal authorities when the telex connection is finally closed, the refund of Rs. 10,000 shall be treated as an income of the assessee of the year in which the amount is refunded.
Circular : No. 420 [F. No. 204/10/83-IT(A-II)], dated 4-6-1985