The Tax Publishers2021 TaxPub(DT) 0681 (All-Trib)

INCOME TAX ACT, 1961

Section 4

Earnest money (EMD) given by contractors was forfeited by assessee on account of non-completion of work and other miscellaneous recoveries were made from contractors and commercial production had not yet started, therefore, receipts were inextricably linked to the project and were capital receipt which could not be brought to tax and would go on to reduce the cost of project.

Income - Capital or revenue receipt - Forfeiture of earnest money - For non-completion of work

AO made addition on account of forfeiture of earnest money and other miscellaneous recoveries from contractors as income from other sources. Assessee's case was that said receipts were inextricably linked with plant set up activities and were in the nature of capital receipt. Held: Earnest money (EMD) given by contractors was forfeited by assessee on account of non-completion of work and other miscellaneous recoveries were made from contractors. It is undisputed that power plant project of assessee was under implementation during concerned assessment year 2013-14 and commercial production had not yet started. Thus, receipts were inextricably linked to the project and were capital receipt which could not be brought to tax and would go on to reduce the cost of project.

Applied:CIT v. Bokaro Steel Limited (1999) 102 Taxman 94 (SC) : 1999 TaxPub(DT) 1094 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14



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