Capital / revenue receipt
This query is : Resolved
13 August 2007
Kindly clear my doubts about following :
1. In a collaboration agreement with builder , an advance is received by the party before the execution under the agreement. If contract is not executed by the builder and advance is forfeited, what will be the treatment of advance received by the party.Will it be a capital receipt- not taxable or revenue receipt taxable in the hands of party? If the contract is given to some other party subsequently , will it change character of the advance received from the earlier builder ?
2.A security deposit is received from the tenant with a condition that landlord will construct a floor in the market place on his building and let it out to him for a period of at least 3 years on a particular monthly rent.On completion of floor, the tenant does not take the possession and security deposit is forfeited and building is let out to some other party after some time . What will the treatment of security deposit forfeited ?
From
Ram Bhuvnesh
Email- rambhuvneshfca@yahoo.co.in
1. In a collaboration agreement with builder , an advance is received by the party before the execution under the agreement. If contract is not executed by the builder and advance is forfeited, what will be the treatment of advance received by the party.Will it be a capital receipt- not taxable or revenue receipt taxable in the hands of party? If the contract is given to some other party subsequently , will it change character of the advance received from the earlier builder ?
2.A security deposit is received from the tenant with a condition that landlord will construct a floor in the market place on his building and let it out to him for a period of at least 3 years on a particular monthly rent.On completion of floor, the tenant does not take the possession and security deposit is forfeited and building is let out to some other party after some time . What will the treatment of security deposit forfeited ?
From
Ram Bhuvnesh
Email- rambhuvneshfca@yahoo.co.in
13 August 2007
Definately in yours 1st case it will be treated as revenue receipt because after forfeiture ,receipt as advance will loose its charaterstic i.e party can not claim for its recovery.
In second case also response will be same.
* But it must clear that Advance/security deposit should not substitute as an advance from second party.
In second case also response will be same.
* But it must clear that Advance/security deposit should not substitute as an advance from second party.
13 August 2007
Why the advance received and forfeited will not be a capital receipt non taxable?
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