Earnest money forfeited by HSIDC on surrender of industrial plot allotment was capital loss not deductible

ICS Systems (P.) Ltd. v. CIT – [2019] 102 taxmann.com 131 (Delhi)

Assessee-company was carrying on manufacturing activities. It deposited an amount of Rs. 10.87 lakhs with Haryana State Industrial Development Corporation (HSIDC) for allotment of an industrial plot. Assessee did not accept said plot as it was not properly measured. It asked for refund of amount deposited.

HSIDC refunded Rs. 6.94 lakhs and Rs. 3.93 lakhs was forfeited. Assessee claimed Rs. 3.93 lakhs as deduction of revenue expenditure which was disallowed by authorities below.

The Delhi High Court held that since loss was incurred in acquisition of a capital asset, forfeiture made by HSIDC while refunding amount would be capital loss and could not be allowed as a revenue expenditure.

 

 

No proceedings as ‘KPTCL’ didn’t deduct TDS on leave encashment treating its employees as State Govt. employees

Karnataka Power Transmission Corporation Ltd. v. ITO – [2019] 102 taxmann.com 245 (Bangalore – Trib.)

Karnataka Power Transmission Corporation Ltd. (KPTCL) was a statutory corporation. It did not deduct tax at source on payments made to its retiring employees towards unutilized leave period encashment.

KTPCL was of view that its employees were employees of the State Government and, therefore, the entire payment to its employees towards unutilized leave period encashment on retirement was exempt under section 10(10AA)(i).

Assessing Officer (AO) initiated proceedings against KPTCL under section 201(1) & 201(1A) by treating it as an assessee-in-default.

The Bangalore ITAT held that section 192 uses word ‘estimate’ and, therefore, statutory obligation of assessee under section 192 is only to make bona fide estimate of income of his employees under head salaries.

KPTCL was under bona fide belief that its employees were to be regarded as employees of the State Government and were entitled to exemption of entire sum of unutilised leave encashment under section section 10(10AA)(ii). Therefore, KPTCL had discharged its obligation under section 192 and, hence, proceedings under section 201(1) & 201(1A) deserved to be quashed.