Case Law Details
Divyasree Holdings Pvt. Ltd Vs Principal Commissioner of Income Tax (ITAT Bangalore)
As far as the addition of Rs.50 lakhs made by the CIT in the impugned order is concerned, the conclusion of the CIT is based on the reading of the different clauses of the MoU. We are of the view that the parties are at liberty to agree on terms even contrary to the MoU dated 1.5.2007. Shri. Rakesh Rastogi forfeited a sum in question and the same was accepted by the assessee. The fact that the assessee could have disputed and challenged the action of Shri. Rakesh Rastogi in forfeiting the sum of Rs.50 lakhs and the failure of the assessee to do so cannot be the basis to conclude that there was no business necessity or legal compulsion on the part of the assessee to have allowed a sum of Rs.50 lakhs to be forfeited by Mr. Rakesh Rastogi. It cannot also be said that the advances given by the assessee to Mr. Rakesh Rastogi as not for genuine business purposes. There is no material on record to come to such conclusion. The expenditure in question has been incurred for the purpose of business as the same was paid to Mr. Rakesh Rastogi for acquiring properties in Delhi for construction of a SEZ. The assessee is in the business of property development and it cannot be said that the advance given to Mr. Rakesh Rastogi is not for the purposes of business of the assessee. The assessee is the best judge as to whether he should accept forfeiture by Mr. Rakesh Rastogi or take a legal stand for recovery of advance paid to Mr. Rakesh Rastogi. The circumstances pointed out by the CIT cannot be a ground to come to a conclusion that the advances given is not for genuine business purposes. In our view, the loss on account of forfeiture of advance paid to Mr. Rakesh Rastogi is incidental to the business of the assessee and is allowable as a deduction under section 37(1) or under section 28 of the Act as held by the Hon’ble Bombay High Court in the case of Harshad J. Choksi (supra). For the reasons stated above, we are of the view that the CIT was in error in adding a sum of Rs.50 lakhs by the impugned order. The said addition is directed to be deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This an appeal by the assesseee against the order dated 27.1.2016 of the Principal CIT, Bengaluru, passed under section 263 of the Act, in relation to Assessment Year 2011-12.
2. The assessee is engaged in the business of property development. For Assessment Year 2011-12, the assessee filed return of income on 28.9.2011 declaring Nil income. The assessment was completed under section 143(3) of the Act by order dated 28.3.2014, accepting the return of income filed by the assesseee. The CIT, in exercise of the powers under section 263 of the Act was of the view that the aforesaid order of the AO was erroneous and prejudicial to the interest of the Revenue for the following 2 reasons:
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