Please Help: Taxability of Advance for Transfer of a Capital Asset

Posted Date : 18-Jul-2014 , 05:03:53 pm | Posted By CA Shraddha Vora

Sec 51 earlier provides that any advance received or retained and forfeited in future shall be reduced from the cost of acquisition. Now that advance is no more necessary to reduce from cost and it has to be shown as the income under other sources us 56 in the previous year. As per the language of the law these amendments will take effect from 1st April 2015 and will apply accordingly in relation to A.Y. 2015-16. Facts of the Case Since the assessee entered into the memorandum of understanding on 20th march 2014, total sales consideration was Rs. 1,90,00,00, Advance received Rs. 35,00,000 on 130314 and 40,00,000 on 050514 and balance consideration to be received before 301114 otherwise the advance will be forfeited. So in case of forfeiture, how much advance need to be reversed in order to avoid tax. Please give your valuable suggestions

Category : Income Tax | Answers : 1 | Comments : 2 | Hits : 317

Answers

Answer By: shankygarg

As per the budget now, forfeited amt. can not be adjusted against the cost of asset and the whole amt. will be Taxable as Income from other sources.

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Manish Kr.

19-Jul-2014 , 11:07:44 pm

1. Reverse 40 lac to avoid tax liability under other sources P.Y. 2014-15 A.Y. 2015-16 2. Reverse 35 lac to avoid deduction in cost when the asset might get sold in future.