Case Law Details
Sh. Ashwani Khurana Vs DCIT (ITAT Delhi)
Undisputedly assessee had entered into an agreement to sell qua his property bearing no. 56 Golf Links, New Delhi with one Sanjay Pashi after accepting the earnest money of Rs. 4,62,50,000/-, which was subsequently forfeited as the prospective buyer Sanjay Pashi has failed to perform his part of the contract. It is also not in dispute that the property in question was ultimately sold by assessee to M/s. HAP apparel pvt. Ltd. for Rs. 21.75 crore, (assessee’s share 50%). It is also not in dispute that the assessee has already offered capital gain on the sale proceed of Rs. 21.75 crore.
However assessee has deducted Rs. 4,62,50,000/- the amount of sale proceeds forfeited from the cost of acquisition of the property in question u/s 51 of the Act and treated the excess of forfeited amount and cost of assets i.e. 2,76,17,652/- as capital receipts.
The Ld. CIT(A) has decided the issue by discussing section 51 of the Act and has also reached the conclusion that u/s 56(2) a new sub-section (IX) has been inserted with effect from 01.04.2015 to treat the forfeited sum as income from other sources, but it is not applicable to the year under assessment which is A.Y 2010-11.
A co-ordinate bench of Tribunal in case cited as Randhir Singh Kadan vs. Department of Income Tax decided the identical issue by treating the earnest money received and forfeited by the assessee in respect of any negotiation for transfer of capital assets to be deducted from the cost of assets. Since in A.Y. 10-11 there was no provision under the Act for treating the forfeiture of earnest money received during the negotiation of a capital assets as income from other sources, the Ld. CIT(A) has rightly deleted the addition.
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