Advancemoney forfeited

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pawan (Querist)
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08 August 2011 Advancemoney of Rs. 1.25 crores received for the land valuing (Cost Rs. 1.00 crores) Market value Rs. 2.00 crores and lateron forfeited. What is the treatment of Forfeited amount of Rs. 1.25 crores.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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08 August 2011 In case of advance received and forfeited
the entire amount of 1.25 crore will be tax free. But when in future the land will be sold its Cost of acquisition will be nil.
As such entire sales consideration will be treated as LTCG( if the asset is LT)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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08 August 2011 As per section 51 of the Income tax Act,1961, advance money received on account of sale of a capital asset and which has been subsequently forfeited, the said amount should be reduced from the cost (fair market value if the land is purchased before 1/4/1981) of that particular capital asset.

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