Law:

Section:

section 12b of the indian income-tax act, 1922 [corresponding to section 45 of the income-tax act, 1961]-capital loss-assessee's agreement of 1946 to purchase property was mutually cancelled in 1958 by forfeiture of part of earnest money paid by assessee-whether loss of earnest money could be treated as capital loss in the assessment year 1959-60-held, no, because the loss occurred due to forfeiture and not from relinquishment by assessee of its capital asset, viz., the right to purchase property Facts The assessee, an investment company, entered into an agreement with a party on 19-9-1946 to purchase two properties at a price of Rs. 11.5 lakhs. It was stipulated that the purchase should be completed within a period of four months subject to various conditions inter alia payment of earnest money and giving a clear title to the properties before payment of the balance. The assessee, accordingly, paid a total amount of Rs. 3 lakhs to the vendor towards earnest money. Thereafter, the assessee was not satisfied about the clear title of the vendor in the properties in question and prolonged correspondences went on and ultimately in August 1958, the agreement for sale of the properties was mutually cancelled on the vendor's repaying Rs. 10,000 to the assessee towards legal cost and the assessee agreeing to the forfeiture of Rs. 2.9 lakhs by the vendor. In the assessment year 1959-60, the assessee claimed the above sum of Rs. 3 lakhs as a capital loss. The ITO rejected the claim on the grounds that- 1.the agreement had nothing to suggest that the earnest money would be forfeited in case the sale was not put through; 2.since the title to the property was not clear, the assessee had an actionable claim against the vendor; 3.the payment of earnest money did not bring into existence any capital asset belonging to the assessee; and 4.in any case, the loss could not be said to have arisen in the relevant previous year as the agreement was made in 1946 and the sale was to be completed within four months therefrom. The AAC held that a capital loss within the meaning of section 12B had resulted from the transaction but the loss had arisen not in the relevant accounting year…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492