Revenue expenditure on cancelled plot bookings depends on real nature of payment, not the label of compensation.

Amounts returned to allottee parties on cancellation of plot bookings were held to be revenue expenditure because they were advances received against proposed plot sales that never resulted in completed transfers. The payments, including interest, were made in the ordinary course of business and for commercial expediency, and their tax treatment depended on their real nature rather than the label of compensation. Earlier-year acceptance of similar claims supported this view, and there was no material to show that the sums represented a repurchase price of stock-in-trade. The addition made by the Assessing Officer was therefore deleted and the departmental challenge failed.

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Issues: Whether the amount paid to the allottee parties on cancellation of plot bookings was revenue expenditure allowable as business expenditure, and whether the addition made by the Assessing Officer was rightly deleted.

Analysis: The amounts were found to be advances received against proposed sale of plots, which never culminated in completed sales or transfer of title. The sums were returned along with interest after the bookings failed, and the plots continued to remain with the assessee. The payment was thus made in the course of business and for commercial expediency. The fact that the amounts were described as compensation was held to be immaterial, since the true nature of the payment governs its tax treatment. The Tribunal also noted consistency in earlier years, where similar claims had been accepted, and found no material to support the Revenue's case that the payment was a re-purchase price of stock-in-trade.

Conclusion: The amount was correctly treated as revenue expenditure, and the deletion of the addition was upheld in favour of the assessee.

Final Conclusion: The departmental appeal failed, and the assessment addition on account of compensation charges did not survive.

Ratio Decidendi: A payment made in the ordinary course of business for returning advances with interest on cancelled plot bookings, where no transfer of title ever occurred, is revenue expenditure and its tax character is determined by its real nature, not by the label attached to it.

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