Case Law Details
Vardhaman Axles & Wheels Pvt. Ltd. Vs DCIT (ITAT Kolkata)
The only effective issue raised in this issue is disallowance of expenditure of Rs. 5 lakh claimed towards forfeiture of earnest money deposit by Orissa Minerals & Development Co. Ltd. (in short “OMDC”). The lower authorities have denied the said deduction considering it as not for business purposes. We, after considering the submissions of both the parties and also the copy of intimation letter dated 09.06.2010 issued by OMDC placed at page 11 of the paperbook, notice that the assessee gave a deposit to OMDC with reference to Auction No. OMDC/65Lumd10-200/02/09-10 page 11 towards sale of iron ore. However, since the assessee failed to lift the material against the allotment of the E-auction issued by OMDC, the earnest money deposit of Rs. 5 lakh was forfeited by OMDC vide letter dated 09.06.2010. Based on this letter ld. CIT(A) has observed that the assessee ought to have claimed the said expenditure for forfeiture of earnest money deposit as an expense for AY 2011-12.
We, however, find merit in the contention of ld. Counsel for the assessee wherein it has been stated that the assessee was trying to recover the forfeited money from OMDC and when all the efforts of the assessee to recover the said forfeited money went in vain the said sum has been claimed as an expenditure. We, under the given facts and circumstances of the case are of the considered view that the assessee has rightly claimed the expenditure of Rs. 5 lakh towards forfeiture of earnest money deposit by OMDC.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-2015 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income Tax (Appeal)-1, Kolkata [in short “ld. CIT(A)”] dated 14.01.2020 arising out of the Assessment Order framed u/s 143(3) of the Act dated 30.06.2016.
2. Registry has informed that the appeal filed by the assessee is time barred by 894 days. Perusal of the records shows that the delay was on account of COVID-19 We, therefore, in view of the judgment of The Hon’ble Supreme Court vide Miscellaneous Application No. 21 of 2022 find that the limitation period in filing appeal between 15.03.2020 till 28.02.2022 has been excluded for calculating the limitation period. Since the period of limitation in the case of the Revenue falls during this period, the same deserves to be extended. Since the assessee has successfully explained the delay in filing the appeal we, therefore, condone the delay and admit the appeal for adjudication.
3. The assessee is in appeal before this Tribunal raising the following grounds:
“1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) grossly erred in confirming the addition of Rs.5,00,000/- made by the A.O. on account of forfeiture of Earnest Money Deposits by Orissa Minerals & Development Co. Ltd.
2. For that the Ld. CIT(A) ought to have allowed the forfeiture of Earnest Money Deposits by treating the same as allowable revenue expenditure.
3. Without prejudice to above, the Ld. CIT(A) ought to have given direction to the A.O. to allow the benefit of deduction of the forfeiture of Earnest Money Deposits in A.Y.: 2011-2012.
4. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing.”
4. The only effective issue raised in this issue is disallowance of expenditure of Rs. 5 lakh claimed towards forfeiture of earnest money deposit by Orissa Minerals & Development Co. Ltd. (in short “OMDC”). The lower authorities have denied the said deduction considering it as not for business purposes. We, after considering the submissions of both the parties and also the copy of intimation letter dated 09.06.2010 issued by OMDC placed at page 11 of the paperbook, notice that the assessee gave a deposit to OMDC with reference to Auction No. OMDC/65Lumd10-200/02/09-10 page 11 towards sale of iron ore. However, since the assessee failed to lift the material against the allotment of the E-auction issued by OMDC, the earnest money deposit of Rs. 5 lakh was forfeited by OMDC vide letter dated 09.06.2010. Based on this letter ld. CIT(A) has observed that the assessee ought to have claimed the said expenditure for forfeiture of earnest money deposit as an expense for AY 2011-12.
5. We, however, find merit in the contention of ld. Counsel for the assessee wherein it has been stated that the assessee was trying to recover the forfeited money from OMDC and when all the efforts of the assessee to recover the said forfeited money went in vain the said sum has been claimed as an expenditure. We, under the given facts and circumstances of the case are of the considered view that the assessee has rightly claimed the expenditure of Rs. 5 lakh towards forfeiture of earnest money deposit by OMDC. Thus, we delete the said disallowance and allow ground no. 1 raised by the assessee.
6. Other grounds of appeal are either general or consequential in nature which need no adjudication.
7. In the result, the appeal filed by the assessee is allowed.
Kolkata, the 28th March, 2023
