Forfeiture of security deposit due to premature termination of agency is not a revenue receipt

Whether forfeiture of security deposit due to premature termination of agency is taxable as revenue receipt came up before the tribunal in Asst.CIT v. Das & Co (2010) 44 DTR (Mumbai)(trib)124. The tribunal held that the agency was cancelled as the licensee wanted termination of licence before the lock-in-period and such premature termination of leave and licence agreement would not convert the deposit receipt in to trading receipt. Thus the case was decided in favour of the assessee-licensor who forfeited the deposit amount.

Yet another issue came up before the tribunal viz. receipt of compensation by the lessor for the inconvenience and hardship due to premature cancellation of the agreement. The tribunal held that the amount paid is in lieu of income otherwise might have been earned by the licensor and hence taxable as revenue receipt.