2019 (8) TMI 183 - AT - Income Tax

Addition on account of capital gain - forfeited amount against the property - earnest money received and forfeited by the assessee due to unsuccessful deal - as submitted amount retained by the assessee is more than the cost / indexed cost of capital asset, the excess amount remains as capital receipt and not taxable anywhere under the provisions of the Income Tax Act - HELD THAT - We find that the facts of the case are similar as have been considered by the ITAT in the case of co-owner SH. ASHWANI KHURANA 2019 (3) TMI 11 - ITAT DELHI 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. Ld. CIT(A) following his findings in the case of co-owner Shri Ashwani Khurana (supra), deleted the addition. The Order of the Ld. CIT(A) in the case of co-owner have been confirmed by the Tribunal. - Decided in favour of assessee

Summary

Issues:
Challenge to deletion of addition of capital gain by AO.

Analysis:
The appeal by the Revenue was against the deletion of an addition of INR 2,76,17,625 made by the Assessing Officer on account of capital gain for the Assessment Year 2010-2011. The case involved the sale of a house property by the assessee, negotiations with another party, receipt of earnest money, subsequent sale to a different buyer, and a legal dispute over the money retained by the assessee. The Delhi High Court had allowed the assessee to retain a portion of the earnest money received during the negotiation. The assessee revised the computation of income to reflect this retention based on a judgment of the Supreme Court regarding the treatment of forfeited advance money in excess of the cost of acquisition. The Assessing Officer, however, did not accept this treatment and directed to charge capital gain on the impugned amount. The Ld. CIT(A) deleted the addition based on similar reasoning applied in a case of a co-owner for the same Assessment Year.

The Tribunal considered the findings in the case of the co-owner and upheld the deletion of the addition by the Ld. CIT(A). The Tribunal noted that the issue was similar to the one considered in the case of the co-owner and that the Ld. CIT(A) had rightly deleted the addition. The Tribunal concluded that since the departmental appeal in the co-owner's case was dismissed on identical facts, there was no need to interfere in the present matter. The Tribunal confirmed the decision of the Ld. CIT(A) in the case of the co-owner and dismissed the Revenue's appeal.

In summary, the Tribunal upheld the deletion of the addition of capital gain made by the Assessing Officer, following the decision in a similar case involving a co-owner for the same Assessment Year. The Tribunal found that the issue was covered in favor of the assessee based on the previous decision and dismissed the Revenue's appeal accordingly.