A two-judge bench of the Delhi High Court has held that the loss occurred on the forfeiture of deposit/ advances suffered by the assessee- Company while surrendering the industrial plot cannot be treated as revenue loss and therefore, no income tax deduction can be claimed on the same.
The assessee claimed that the amount of Rs.3,93,327/- deducted by Haryana State Industrial Development Corporation (HSIDC) on surrender of the industrial plot can be treated as revenue expenditure. However, the Assessing Officer held that the loss of money of the appellant caused by forfeiture of advance/deposit towards the proposed purchase of plot, unilaterally deducted by HSIDC is a capital loss and not deductible. According to him, the amount deposited with HSIDC was for acquiring a capital asset, and hence the amount deducted by HSIDC on surrender of the industrial plot would be a capital loss and not revenue expenditure.
The first appellate authority granted relief to the assessee.
However, on the second appeal, the Tribunal upheld the order of the Assessing Officer by holding that such a Revenue loss incurred in the course of the assessee’s running business as no capital asset was acquired or transferred by the Appellant.
The Division bench comprising Justice Sanjiv Khanna and Justice Anup Jairam Bhambhani upheld the orders of the Assessing Officer and the Tribunal and observed that in the present case, the loss incurred was in the transaction relating to and for the acquisition of a capital asset.
“For some reason, the attempt made by the appellant-assessee to acquire land/plot as a capital asset did not fructify. Hence, the appellant-assessee had asked for a refund of the amount, which was paid for acquisition of the capital asset. Forfeiture or deduction made by the HSIDC while refunding the amount would be a capital loss and not a revenue expenditure,” the bench observed.To Read the full text of the Judgment CLICK HERE