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Taxation of advance received against property forfeiture

Mohit Gupta (Article) (35 Points)

05 March 2016

Assessee receives Rs. 250000/- in FY 2013-14 as an advance for sale of agriculture land.

The said amount is forfeited due to some reasons.

How to calculate the tax on the same and in which year?

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5 Replies

Kuldipsinh Jadeja (Job) (357 Points)
Replied 05 March 2016

As per section 51 of Income Tax Act, such advance monery forfeited in F.Y. 13-14 would be reduced from the cost of agricultural land while calculating capital gain ( asssuming it is not a rural agricultural land). However, from A.Y. 15-16 section 51 is amended and now it provides that any advance money forfeited would not be deducted from cost of capital asset but it would be taxable as income from other source under section 56(2)(ix) of the Act.

Mohit Gupta (Article) (35 Points)
Replied 06 March 2016

Hi Kuldeep,

Thanks for your reply but it is a rural agricultural land. Also if the assessee has received some agriculture income from this land than how can we proove it with the ITO as we dont have any receipt for the same but the cash is deposited in the saving account of the assessee.

Kuldipsinh Jadeja (Job) (357 Points)
Replied 06 March 2016

If it is rural agricultural land than there will not be any capital gain, since the asset under consideration is not a capital asset. If assessee has received agriculture income than ask purchaser to provide a receipt for the same.

Mohit Gupta (Article) (35 Points)
Replied 06 March 2016

This thing was managed by her brother and she dont have any proof with her for the sale. As she was not supposed to maintain any accounts she never kept anything with her. She can only produce the Land papers to the AO. Will it be justificable.