TaxTMI 
TaxTMI 
2019 (5) TMI 1713
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....at the CIT(A) erred in deleting the addition made by the Assessing Officer amounting to Rs. 3.50 crores on account of forfeiture of advance. 3. During the course of scrutiny assessment proceedings the Assessing Officer noticed that the entire capital gains and interest income has been offset with the amount of Rs. 3.50 crores claimed as forfeiture of advance. The assessee was asked to justify the offset. The assessee was further asked to show cause why the forfeiture of advance for purchase of property should not be treated as a capital expenditure. 4. In its reply the assessee submitted that the main object of the company is real estate development and the advance was given during the normal course of business. The forfeiture of the ....
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....id in 36 Equated quarterly installments of Rs. 29,04,142/- each commencing from 01/04/2007". d. Further, assessee company has also sold the property at Defence Colony during the year under consideration and was having enough amount to be paid to M/s HDIL which were utilized to pay as loans & advances. e. It is apparent from the above that the entire exercise has been created by the assessee company to adjust the short term capital gains earned due to sale of Defence colony property against forfeiture of advance. f. The colorful devise of forfeiture of advance is also apparent as the agreement to sale was entered into by the assessee company in 12.10.2004 with M/s HDIL and the substantial amount of Rs. 3.50 Crores ....
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....hing but colorful device to adjust the capital gains. The Assessing Officer was of the strong belief that the forfeiture has the character of capital expenditure and accordingly made the addition of Rs. 3.50 crores. 7. Assessee strongly agitated the matter before the CIT(A) and reiterated its claim of forfeiture as revenue expenditure. 8. After considering the facts and the submissions and after considering the some judicial decisions the CIT(A) concluded as under :- "2.2 In the instant case the advance of Rs. 3.50 crore was given in the ordinary course of business. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to....
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....ing Officer while treating the write off as capital expenditure. 12. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the forfeiture of Rs. 3.50 crores claimed by the assessee as revenue expenditure has been treated by the Assessing Officer as capital expenditure. This conclusively establishes the genuineness of the transaction and therefore, cannot be accepted as a colourable device. All that is now required to be decided is whether the write off is a capital expenditure and revenue expenditure. The judicial decisions relied upon by the Ld. DR (supra) would do no good to the revenue. 13. There is also no dispute that the advance for the purchase of property given to HDIL was gi....
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....mount of consideration by M/s Frontier Land Development Private Limited leading to forfeiture of advance amount of Rs. 3.50 Crores by HDJL. 3. The balance amount of Rs. 8.15 Crores was expected to be paid by the company out of inter corporate loans and loans from banks / financial institutions." 14. In our considered opinion the Assessing Officer cannot step into the shoes of the assessee so as to hold that when the funds were available why the balance sum of money was not paid. 15. As mentioned elsewhere by treating the forfeiture as a capital expenditure, the Assessing Officer himself has accepted the transaction of adjustment of Rs. 3.50 crores and its write off / forfeiture subsequently. On identical set of facts the coor....