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2010 (2) TMI 819 - AT - Income TaxForfeiture of Earnest Money Deposit (EMD) - earnest money was paid on percentage basis of quota allotted – Held that:- forfeiture of earnest money and security deposit as deductible from the income. The amount was held to have been paid for securing right to purchase stock-in-trade and hence was not in the nature of capital expenditure. In the instant case, the quota has been allotted on the basis of past performance in the field of export and payment of earnest money is incidental to fulfilment of the quota so allotted and, therefore, it cannot be said to have been deposited for acquisition of the quota. Therefore, forfeiture of security deposit is in the nature of business loss and has to be allowed as deduction, appeal filed by the assessee is allowed.
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