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Income Tax Appellate Tribunal, DELHI BENCH “SMC-2”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-9, New Delhi dated 17.06.2019 for the Assessment Year 2016-17, wherein, the disallowances made by the ld ACIT, Circle-26(1), Delhi of Rs. 355999/- as per assessment order passed u/s 143(3) of the Act on 16.12.2018 is upheld. The assessee aggrieved with the order has preferred the following grounds of appeal:- “1. That the ld CIT(A) has erred both on facts and in law in sustaining a disallowance of a sum of Rs. 3,55,999/- claimed as deduction.
2. That the ld CIT(A) has failed to comprehend the factual substratum of case and had failed to appreciate that the sum claimed as deduction since had been included in the total income of the preceding year on account of an amount forfeited was liable to be allowed as a deduction, while computing the total income of the appellant on its refund.”
2. Brief facts of the case shows that the assessee is a company carrying on business as owners, developers, builders, colonizers, hirers and dealers of real estate, filed its return of income declaring loss of Rs. 4897466/- Page | 1 on 16.10.2016. The ld AO found that the assessee has paid an amount of Rs. 355999/- on account of flat forfeiture. The assessee was questioned, explanation was obtained however, and same was rejected. The ld AO was of the view that this amount is not in the nature of revenue expenses as these are in nature of advance made therefore, cannot be allowed u/s 37 of the Act. It was held to be a capital expenditure.
3. These disallowances was contested by the assessee before the ld CIT(A) who also confirmed the same. Therefore, the assessee is in appeal before us.
We have heard the rival parties and found that appellant is a company who was granted license for development of commercial colony. On 18.03.2015 one M/s. Vatika Ltd by a business transfer agreement transferred the development right to the assessee. Appellant forfeited those unit which was also allotted and had returned the amount to such allottees during the year 2015-16 . Such consideration received of Rs. 1245994/- was considered as real estate income and offered for taxation in that year. During the year the assessee returned a sum of Rs. 355999/- to M/s. Pramajit Singh & Amarjit Singh in respect to an area booked in their names of 500 sq ft. at the rate of Rs. 7400/- per sq ft. which was paid back since the unit booked in their name already cancelled and amount forfeited. The assessee cancelled the forfeiture of the amount of Rs. 355999/- since the amount already forfeited was already considered as an income and revenue receipt in assessment order 2015-16, the amount now paid out of above income was considered as a revenue expenditure and claimed as a deduction. Both the lower authorities held that the sum is capital expenditure and even otherwise not allowable u/s 37 of the Act. The above claim of the assessee on account of repayment of forfeited amount earlier received by the assessee, taxed duly in AY 15-16, subsequently, those persons received forfeited amount from assessee, booked the real estate during the year and therefore, forfeited amount was returned by the assessee is definitely an expenditure which springs from the business of the assessee of the real estate. The above expenditure has been incurred by the Page | 2