TMI Blog2019 (5) TMI 1713X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no dispute that the advance for the purchase of property given to HDIL was given in the year 2004. As per the agreement the assessee had to pay the balance amount of ₹ 8.15 crores within three years from the date of agreement. The deal could not be materialized due to the inability of the assessee to pay balance sum of money. Assessing Officer cannot step into the shoes of the assessee so as to hold that when the funds were available why the balance sum of money was not paid. As mentioned elsewhere by treating the forfeiture as a capital expenditure, the Assessing Officer himself has accepted the transaction of adjustment and its write off / forfeiture subsequently. As decided in REKHI LAMBA REALTORS [ 2010 (12) TMI 1319 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to justify the offset. The assessee was further asked to show cause why the forfeiture of advance for purchase of property should not be treated as a capital expenditure. 4. In its reply the assessee submitted that the main object of the company is real estate development and the advance was given during the normal course of business. The forfeiture of the same has been treated as on revenue loss. The assessee furnished the copy of conformation from HDIL regarding forfeiture of advance against property and also furnished copy of bank account highlighting advance given for property. 5. The reply filed by the assessee did not find favour with the Assessing Officer who observed as under :- a. As per details subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove that the entire exercise has been created by the assessee company to adjust the short term capital gains earned due to sale of Defence colony property against forfeiture of advance. f. The colorful devise of forfeiture of advance is also apparent as the agreement to sale was entered into by the assessee company in 12.10.2004 with M/s HDIL and the substantial amount of ₹ 3.50 Crores has been paid and the balance amount of ₹ 8.15 Crores was to be paid and all of sudden when assessee company has sold their defence colony property and earned short term capital gains, the forfeiture of advance has arisen. g. The forfeiture of earnest money by M /s HDIL is nothing but a capital loss not revenue loss as claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue expenditure. 8. After considering the facts and the submissions and after considering the some judicial decisions the CIT(A) concluded as under :- 2.2 In the instant case the advance of ₹ 3.50 crore was given in the ordinary course of business. If the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to the capital and is of the nature of capital expenditure. On the other hand, it is not made for the purpose of bringing into existence any such asset or advantage but for running the business or working it with a view to produce the profits, it is a revenue expenditure. The advance of ₹ 3.50 crore was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated by the Assessing Officer as capital expenditure. This conclusively establishes the genuineness of the transaction and therefore, cannot be accepted as a colourable device. All that is now required to be decided is whether the write off is a capital expenditure and revenue expenditure. The judicial decisions relied upon by the Ld. DR (supra) would do no good to the revenue. 13. There is also no dispute that the advance for the purchase of property given to HDIL was given in the year 2004. As per the agreement the assessee had to pay the balance amount of ₹ 8.15 crores within three years from the date of agreement. The deal could not be materialized due to the inability of the assessee to pay balance sum of money. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the company out of inter corporate loans and loans from banks / financial institutions. 14. In our considered opinion the Assessing Officer cannot step into the shoes of the assessee so as to hold that when the funds were available why the balance sum of money was not paid. 15. As mentioned elsewhere by treating the forfeiture as a capital expenditure, the Assessing Officer himself has accepted the transaction of adjustment of ₹ 3.50 crores and its write off / forfeiture subsequently. On identical set of facts the coordinate bench in the case of Rekhi Lamba Realtors Vs. ITO in ITA No.888/Mum/2009 held as under :- After considering the rival contentions and relevant record. We find that the CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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