08 February 2011
Please advice and explain the tax treatment on the following query
The bank sanctioned the loan to company by having first charge on fixed asset (movable & Immovable) along with two collateral securities namely residential house (seven co-owners-Inherited including Managing Director) and one shop (Two co-owners other than for residential property). The co-owners also stood as third party guarantors. The bank classified the account as NPA and recalled the advance U/s 13(2) of the SRFAESI Act, 2002 and directed the company to pay the total outstanding within 60 days and in case of non compliance of this notice, the bank will sell the mortgaged asset which is given as collateral security. The bank took the symbolic possession of the residential house and shop. The company filed a CWP with the high court with a request to restrain the bank from taking over the physical possession of the property. The High Court ordered to maintain status quo during the pendency of writ petition. During the pendency of writ petition, the company and bank entered into an agreement and decided to sell the residential house. The entire sale proceeds are to be deposited was the precondition in the loan account prior to sale deed being executed. The bank specifically mentions original document and sale deed will be executed only after the receipt of sale proceeds of the above said property i.e. prior to sale. Further, the company has to also regularize the balance loan amount which is repayable in 51 EMI’s with the condition that the shop will remain as collateral security and all the guarantors including that of residential house co-owners will remains guarantors till the disposal of entire loan liability. The court directed the prospective buyer to deposit the entire sale proceeds directly in the loan account of the company and after that sale deed can be executed. The entire sale proceeds were directly deposited in the bank loan account by the buyer and sale deed was executed after that only as per the agreement with the bank and directions of the High Court. Please advice and explain the tax treatment for co-owners and company:- FOR CO-OWNERS:- There are seven co-owners of the above said sold property with defined share. Kindly enlighten the taxation of capital gain as sales proceeds of the property is entirely appropriated towards repayments of loan taken by company and the co-owners did not received any money not even a single paisa out of the sale proceeds.
FOR COMPANY:-Accounting treatment for direct deposit of sale proceeds in bank loan account of the company by the buyer. How to reflect the transactions in the books of account of the company.
FOR COMPANY:-Tax implication for the company on receipt of amount which was deposited in the loan account of company on account of sale proceeds of the collateral security sold of the guarantors.
CA.Jasvir Walia
Guest
Guest
(Expert)
09 February 2011
Very long query . make it small please but understandable.
CAclubindia
