INCOME TAX ACT, 1961

Section 56(2)(ix) Section 51

Income from other sources - Assessee received advances for procuring went into litigation - Whether such receipt of advances was virtual forfeiture of the said amounts by assessee because aforesaid advances were not refundable in terms of procurement agreement -

AO observed certain outstanding amounts from certain parties (Metro Corp and Metro Corp Infrastructure Ltd.). Assessee claimed that same were received for procuring lands but project went into litigation and no further advance could be given to assessee for land procurement as per the agreement. AO made addition by invoking provisions of section 56(2)(ix) in respect of the amounts shown as a liability to said parties by holding that there was a virtual forfeiture of the said amounts by assessee because aforesaid advances were not refundable in terms of procurement agreement and because lenders did not take any steps for recovery of said amounts. Held: Assessee received money for procurement of land on behalf of two parties, which could not be said that assessee received money on transfer of his capital asset to the two parties. Further, assessee did not forfeit amount received by him and it was shown as outstanding in respective name of said two parties in balance sheet of assessee. Entry in the balance sheet itself showed that it was outstanding on the date of the balance sheet and assessee was liable to pay the same to the two parties. More so, parties gave confirmation letters stating that amount was outstanding from assessee to them. In such a situation, it could not be considered as an amount forfeited by assessee so as to invoke the provisions of section 56(2)(ix).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

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