Relief to Benetton India: ITAT allows Business Loss incurred on Forfeiture of Rental Security Deposits [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal, in a major relief to Benetton India, held that the loss incurred on forfeiture of security deposits given for lease of rental premises can be claimed as business loss.

During the year, the assessee has entered into a letter of intent for obtaining shops on lease. As per this letter, the assessee was required to pay security deposits at the time of executing this letter of intent.Owing to certain business reasons and as per the management decisions, the assessee has terminated these letters of intent, and resultantly the number of security deposits have been forfeited by the lessor. The AO disallowed such claim of advances written off on the grounds that the same forms part o f the balance sheet and not in revenue in nature.

According to the assessee, the advances written off is not a capital loss as it is written off as security deposits against the shops obtained on rent.

A two-judge bench of the Tribunal comprising Dr. B. R. R. Kumar, Accountant Member Ms. Astha Chandra, Judicial Member has held that “Having gone through the entire judgments quoted by both the parties, provisions of the Act pertaining to interplay between Section 28 and Section 37, and facts of the case , we have no hesitation to hold that the assessee be allowed to claim the loss incurred in for feiture of security deposits given for lease of rental premises as the expenses are incurred wholly and exclusively for the purpose of business.”

To Read the full text of the Order CLICK HERE

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