The Hindu Business Line : Can loss of advance payment be treated as capital loss?

Loss of advance paid towards capital asset acquisition: I wanted to buy a vacant land and made advance payment of Rs 1 lakh to the vendor. The sale agreement prescribed three months for payment of the balance of the consideration and for registering the conveyance deed. Later, I decided not to proceed with the deal for acquiring the asset. The vendor forfeited the advance money, according to the sale agreement. Can I claim the amount lost as capital loss (short-term) eligible for set off and carry forward benefits?

Possibility of postponing recognition of income up to the expiry of bank guarantee: We are manufacturers and suppliers of generator sets. While supplying to big industries, the contract provides for post-sales service for two years and the customers can hold back 20 per cent of the sale price. Alternatively we provided bank guarantee for the said sum. After the warranty period, the amount is released or the guarantee is revoked. We, hence, excluded 20 per cent of the sale price (being the amount withheld by the customers) while recording the value of sales. Is this a valid accounting practice?

Direct demand from payee of income is barred: Our firm is engaged in jobwork activity. For each of the jobwork done by us, the payers deduct tax at source under Section 194C by intimating the fact of deduction by means of debit note. For 2007-08, Rs 2 lakh was deducted out of the payments due to us. Some of the deductors have not given tax deduction at source certificates. The AO, in the absence of certificates and details of tax deduction, has raised tax demand on us. Do we have to to pay tax, notwithstanding that sufficient sums were deducted at source by the payers of jobwork charges?

Determination of deemed dividend: Our company has accumulated profit of Rs 5 lakh. During the year it gave a loan of Rs 3 lakh to one of the directors having 40 per cent shareholding in the company. The AO taxed the amount given as deemed dividend in the hands of the director. However, according to income-tax records, the company has unabsorbed depreciation of Rs 4 lakh. Can the depreciation, according to the IT Act, be reduced for the purpose of computing accumulated profits chargeable to tax as deemed dividend?

Unaccounted cash seized from employee and penal consequence: One of the employees of our company carried cash of Rs 15 lakh, which was seized by the police and subsequently requisitioned under Section 132A by the Income-Tax Department. Subsequently, on a survey under Section 133A on our business premises, it was admitted that the Rs 15 lakh seized from the employee belonged to the company and it was offered as income while filing the return. The AO completed the assessment under Section 153A and wants to levy concealment penalty under section 271(1)(c). Is he justified in the action?

Expenditure on transfer fully claimed by a co-owner: I owned an immovable property jointly with four persons. The property was transferred in July 2007 and the brokerage towards the transaction was claimed fully by me in computing capital gains. The other co-owners have not made any claim towards the brokerage expenditure. The AO wants to restrict the deduction claim to one-fifth of the expenditure and says that the other co-owners are only eligible to claim their respective shares. Is the AO justified in restricting my claim?

(PracticeProblems.blogspot.com)