Deduction available or not

This query is : Resolved

Nikhil Prajapati (Querist)
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04 May 2018 Suppose i have paid advance to purchase capital asset and that advance has been forfeited by seller. Now in the hands of seller it is taxable under other source but am i eligible to claim it as an expense?? If yes then under which section??

In the case of above what if advance is paid for material??

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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04 May 2018 1. Since the advance has been paid for the purchase of capital asset , it is a capital expenditure and as such you can not claim it as an expense to compute your income . It has to be capitalised.
2. Advance paid for Material- You can claim as an expenses subject to the conditions as laid down U/s 37(1).

Nikhil Prajapati

Nikhil Prajapati (Querist)
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04 May 2018 Thanks Sir but if we have not received asset how can we capitalised it?? and should we charge depreciation on it??

CA. Mohit chaturvedi

CA. Mohit chaturvedi (Expert)
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04 May 2018 As per the fundamentals of Income tax Act, Capital expenditures are always disallowed unless specifically allowed.
In the given case, the said loss is in the nature of capital receipts..
Under the income tax act, there is no section which permits the deduction in respect of capital loss of this nature, hence it is not allowed,

CA. Mohit chaturvedi

CA. Mohit chaturvedi (Expert)
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04 May 2018 Furthermore, No deduction in respect of this loss shall be allowed as a depreciation too.

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