TaxTMI 
TaxTMI 
2019 (3) TMI 1205
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....;ble ITAT erred by Nesarikar confirming the action of the Ld. CTD(A) that the amount got forfeited during the course of carrying on of the business was capital expenditure and not allowable as Revenue Expenditure in the absence of any concrete asset acquired by the appellant ? 2. Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal erred in holding that it was capital expenditure without appreciating the legal position that when assessee incurs a liability under a contract (Abandoned project) or in pursuance of contract, no amount is receivable the assessee is entitled to claim said amount incurred as expeditious in implementing contract S. 37(1) r.w.s 28(1) ?" 2. Brief facts are as under; The Appellant ....
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....f cancellation of MOU on 28/02/2009. The seller forfeited the sum of Rs. 90,00,000/and returned the rest to the assessee. The assessee contended that the sum of Rs. 90,00,000/was his revenue loss. The Assessing Officer held that the loss was a capital loss. The Tribunal in the impugned judgment observed that the payment was made pursuant to the said MOU, which was by way of advance for acquisition of Windmill. The assessee entered into new business of generation of power. The advance was therefore in the nature of capital advance or capital investment. The loss in the present case did not arise during the course of business but from the investment in capital asset. 5. In background of such facts, Mr. V. Sridharan, the Counsel appea....
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....lize and the agriculturist refused to return the amount. When the assessee claimed such amount by writing it off in the books of accounts, the Assessing Officer rejected the claim, the Tribunal allowed the claim of the assessee on the ground that since a new project had never matured, the expenditure was in the nature of revenue expenditure. The High Court confirmed the view of tribunal. (ii) In case of I. B. M. World Trace Corporation Vs. Commissioner of Income-Tax, reported in [1990] 186 ITR 412 (Bom.), in which Division Bench of Bombay High Court considered a case where the assessee had entered into an agreement with one person, who undertook to construct the factory and lease it to the assessee. To facilitate such construction, the as....
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....e (10) of the agreement, the seller would forfeit a sum of Rs. 90,00,000/out of the payment already made by the assessee. This clause (10) of the agreement reads as under; "10. It is expressly agreed between the parties that payment terms are the essence of contract. In case of any failure to pay the agreed amount within the agreed time, the party of the FIRST PART has a right to withdraw / cancel the contract and in such event, the party of the FIRST PART shall be entitled to forfeit an amount of Rs. 90 Lacs [Rs. Ninety Lacs Only] and the balance amount, out of total payments received from the party of the SECOND PART, shall be refunded to the party of SECOND PART within one month of withdrawal / cancellation of the contract, with no inte....
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.... party would hand over all original documents relating to the project to the assessee 'on receipt of full and final payment'. As per the clause (17), the seller on receipt of such final payment, put the assessee in possession of the project and the assessee would acknowledge having received the possession from the seller. Thus, all these clauses envisaged the transfer of the title only upon the full payment of the sale consideration as per the MOU. Even otherwise, title in the immovable property would not pass otherwise than under a registered document which is compulsorily registerable. It may be that the assessee was put in possession at the time of execution of the agreement and allowed the use of the project also. Clause (17) r....
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....e to pay the agreed amount within the agreed time on the part of the assessee, the seller would withdraw or cancel the contract and in such event, the seller would be entitled to forfeit an amount of Rs. 90,00,000/and return the balance out of the sum already paid. The salient feature of this clause is that the sum of Rs. 90,00,000/to be retained by the seller is fixed irrespective of which installment the assessee failed to pay, for how long the possession and use of the asset is retained by the assessee and under what circumstances the payment could not be made. Linking of sum of Rs. 90,00,000/to be retained by seller on account of default of payment by the assessee, to the lease rental charges, would be opposed to the forfeiture clause ....