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TMI Blog2018 (12) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... is not covered by the provisions of Section 36(1)(viia) of the Act but certainly it will be allowable u/s 37(1) of the Act - Decided in favour of assessee. - ITA No.351/Ind/2017 - - - Dated:- 19-12-2018 - MR KUL BHARAT, JUDICIAL MEMBER AND MR MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri R.P. Mourya, Sr.DR For The Assessee : Shri S.N. Agrawal Pankaj Mogra,CAs ORDER PER MANISH BORAD, AM. The above captioned appeal is filed at the instance of assessee pertaining to Assessment Year 2013-14 and is directed against the orders of Ld. Commissioner of Income Tax (Appeals)-I (in short Ld.CIT(A) ], Indore dated 28.02.2017 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance of ₹ 3,00,000/-. Income assessed at ₹ 8,71,11,650/-. 4. Aggrieved assessee preferred appeal before Ld. CIT(A) and partly succeeded. 5. Now the assessee is in appeal before the Tribunal raising the sole ground against the findings of Ld. CIT(A) maintaining the disallowance of ₹ 31,50,000/- made by the Ld. A.O u/s 37(1) of the Act for treating the earnest money forfeited by Maruti Suzuki India Pvt. Ltd as capital expenditure. 6. Ld. Counsel for the assessee referring to the paper book submitted that the assessee company applied for the dealership of Maruti Suzuki India Pvt. Ltd and gave deposits on various dates. At the time of the application the assessee company agreed to purchase a plot for setting up th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted the orders of Ld. CIT(A). 8. We have heard rival contentions and perused the records placed before us. The sole issue raised before us for adjudication is that whether both the lower authorities were justified in treating the forfeiture of earnest money as capital expenditure. 9. Perusal of the records shows that the assessee company applied for dealership of Maruti Suzuki India Ltd. Correspondences of the officials with Maruti Suzuki India Ltd are also placed on record. Amount of ₹ 31,50,000/- which included ₹ 30,00,000/- as deposit and the remaining amount for application were paid to Maruti Suzuki India Ltd. At the time of application for taking dealership, assessee agreed to purchase Plot No. RA-17, Scheme No.71, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the communication between the assessee and Maruti Suzuki India Ltd we came across a particular mail from Shri Hardeep S. Brar, Officer In-charge of Maruti Suzuki India Ltd placed at page 111 of the paper book, given to inform the assessee about the forfeiture of the amount. The relevant extract of this mail dated 8.12.2010 is mentioned below:- Dear Mr. Aditya Sharma, We are disappointed to note that there is little progress in the matter so far. Pls find below the chronology of events during the past 3 months without any progress. 1. The proof of possession of the site was to be provided by 7th Sep2010 as per the original letter dated 23rd July 2010. 2. This timeline as no fulfilled and meeting was held at o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much of time in this project but of no avail. We have been patiently waiting to come out with the solution, however, it is not possible to wait any longer considering the circumstances and hence, with heavy heart we have to withdraw this project. Pls be informed that under the circumstances, security amount deposited by you will be forfeited. Regards, Hardeep S. Brar 12. The above communication given by the Officer In-charge of Maruti Suzuki India Ltd gives complete series of facts which nowhere leaves a doubt that the transaction relating to acquiring dealership were entered into in the due course of business and for unavoidable circumstances the deal could not be finalised which lead to loss to the assessee in the shape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectfully following the ratio laid down in the above stated judgments and also in the given facts and circumstances of the case are of the opinion that the alleged earnest money was paid by the assessee to Maruti Suzuki India Ltd in its capacity as a person carrying on business and the contract for taking an agency of vehicle manufactured by Maruti Suzuki India Ltd was a business contract entered into with a view to earn profit and it was not made or secure any capital asset or a advantage endeavour in nature. As such the alleged amount though is not covered by the provisions of Section 36(1)(viia) of the Act but certainly it will be allowable u/s 37(1) of the Act. We accordingly allow Ground No.1 raised by the assessee and direct the L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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