Forfeiture of share application money being capital receipt is not taxable

ACIT Vs V C Solutions Pvt. Ltd. (ITAT Delhi)

ITAT Delhi held that forfeiture of share application money being forfeiture of a kind of deposits cannot be treated as revenue receipt. The same is capital in nature and hence not taxable.

Facts- Vide the present appeal, revenue has mainly contested that the ld. CIT(A) has erred in deleting the addition of Rs.26,13,97,349/- made on account of write off of share application money amounting to Rs.26,13,97,349/- ignoring the facts that the assessee has not provided any details to furnish the identity, creditworthiness and genuineness, has failed to shift the onus and it remains unexplained expenditure.

Notably, AO has treated the forfeiture of share application money as ‘Revenue’ in nature. Whereas, CIT(A) deleted the addition holding that the forfeiture of share application money as capital in nature.

Conclusion- Held that the ld. CIT(A) has rightly followed the decisions of the various Tribunals and rightly held that the quantum so forfeited takes the character of capital receipt being forfeiture of a kind of deposits. Hence, it cannot be treated as revenue receipt. The order of the ld. CIT(A) is affirmed on this ground.

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