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Tax Publishers Ashok Kumar Parmar v. ITO [ITA No. 2053/Pun/2017, dt. 14-8-2020] : 2020 TaxPub(DT) 3192 (Pune-Trib.) Disallowance of earnest money deposit in the hands of a real estate businessman *Facts:* Assessee a real estate developer had paid Earnest Money Deposit (EMD) Rs. 46.40 lakhs to Greaves Limited to procure a property in 2003 which could not materialize thus claimed it as an expenditure/loss in assessment year 2012-13. Ad interim since 2003 he had levied a suit for specific performance which stood dismissed in 2012. Thus the EMD paid in 2003 was claimed as loss/expenditure in assessment year 2012-13 (almost 10 years later). This stood disallowed by lower authorities that the said expenditure/loss did not pertain to the said assessment year. On higher appeal -- Held in favour of the assessee that it was in 2012 that they came to know of the non-recoverability by dismissal of the suit of specific performance until then the assessee was pursuing the matter hopeful of some succor from Greaves Limited. *Editorial Note:* Since the assessee is a real estate developer property becomes stock-in-trade and thus the EMD loss/expenditure was allowable as simple loss of advance or bad debt of advance paid for procuring stocks. The time gap of 10 years as to why did the assessee have to wait for this long when he could simply invoked section 36(1)(vii) by writing off the money much earlier is not known.

Tax Publishers

Ashok Kumar Parmar v. ITO [ITA No. 2053/Pun/2017, dt. 14-8-2020] : 2020 TaxPub(DT) 3192 (Pune-Trib.)

Disallowance of earnest money deposit in the hands of a real estate businessman

Facts:

Assessee a real estate developer had paid Earnest Money Deposit (EMD) Rs. 46.40 lakhs to Greaves Limited to procure a property in 2003 which could not materialize thus claimed it as an expenditure/loss in assessment year 2012-13. Ad interim since 2003 he had levied a suit for specific performance which stood dismissed in 2012. Thus the EMD paid in 2003 was claimed as loss/expenditure in assessment year 2012-13 (almost 10 years later). This stood disallowed by lower authorities that the said expenditure/loss did not pertain to the said assessment year. On higher appeal --

Held in favour of the assessee that it was in 2012 that they came to know of the non-recoverability by dismissal of the suit of specific performance until then the assessee was pursuing the matter hopeful of some succor from Greaves Limited.

Editorial Note: Since the assessee is a real estate developer property becomes stock-in-trade and thus the EMD loss/expenditure was allowable as simple loss of advance or bad debt of advance paid for procuring stocks. The time gap of 10 years as to why did the assessee have to wait for this long when he could simply invoked section 36(1)(vii) by writing off the money much earlier is not known.