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Compensation received

Bharat Vihari (Student CA Final ) (34 Points)

14 December 2013

Dear All,

I have a query regarding treatment and taxability of compension received. For an example, Mr. A has given a Loan Advance of Rs. 20,00,000/- to Mr. B. But Mr. B has gone abroad and forgot about it. Then Mr. A has filed a petition in court and recovered a total amount of Rs. 42,00,000/- by the order of the court. How is this amount treated in accounts of Mr. A? And also what are the Tax Implications on the same? Please quote any Case Law related, if any.

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3 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 14 December 2013

Amount over 20 lacs shall be assessed under income from other sources.

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ANKIT GOEL (Expert) (26 Points)
Replied 14 December 2013

Firstly intt on 20 lakhs shall be added in 20 lakhs

then excess over 20 lakhs and intt shall be chargable to tax.

its an business receipt under section 28 and chargable to tax u/s 28.

and intt is also taxable u/s 56 as I/O/S.

Bharat Vihari (Student CA Final ) (34 Points)
Replied 16 December 2013

Thank u very much. But is there any chance that is not taxable? Because I learnt that Compensations for losses or damages are not treated as income and hence not taxable. Please explain the charging section for compensation, if any.