2010 (12) TMI 1319

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.... Yadav. ORDER PER VIJAY PAL RAO, JM This appeal by the assessee is directed against the order dated 11.12.2008 of CIT(A)-XV, Mumbai for the assessment year 2005-06. 2. The assessee has raised various grounds in this appeal , however, the only issue arises for our consideration and adjudication is whether in the facts and circumstances of the case, the CIT(A) is justified in confirming ....

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....d the said amount of Rs. 7,92,000/- to the profit and loss account and business loss and claimed the expenditure as business expenses. The AO disallowed the claim of the assessee on the ground that the for feiture of earnest money of Rs. 7,92,000/ - is in the nature of penalty / fine for breach of contract which cannot be allowed as business expenditure in view of the Explanation to Section 37(1) ....

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....e, the said forfeiture is not a penal ty or fine falls under the Explanation to Section 37(1) of the Act. He has further pointed out that since the loss of the earnest money is in the normal course of business of the assessee and therefore the same is allowable as business loss and directly related to the income as well as business transact ions of the assessee 6. On the other hand, the learned....

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....disputed fact that the forfeiture money deposited was as per the terms and conditions of the agreement executed between the CIDCO and the assessee and not because of in violation of any law which would amounts to any off ence and an act which prohibited by law. Therefore, the for feiture of the earnest money by the CIT(A) as per the terms of the agreement does not fall under the Explanation to Sec....