Biggest tax evasion - capital gain in it act 1961

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CA Hardik Bunha (Querist)
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16 November 2011 F.Y. 2006-07 In Loans and advances name of X shows by Rs. 5,00,000/-

After 4 Years(F.Y. 2010-11) capital gain arise Rs. 4,30,000/- (Assume after all calculation)

In that year i write off Mr. X's a/c as Mr. X is not eligible to pay my money.

So, Now Tax Treatment will be in LOSS (After set off u/s 70) Loss will be Rs. 70,000/-.

HEY MY FRIENDS ONLY EXPERTS WELCOME..........

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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17 November 2011 Firstly Section 71 will be applicable and not Section 70, becuase this is a case of inter-head adjustment, i.e., set-off of loss under PGBP against income under the head Capital Gain.

However, your tax treatment is correct, assuming there is no income under the head PGBP. So writing off loans is a bad debt and allowed as deduction, therefore it results in a loss.

But, my friend always remember one thing. Financial prudence prevails over tax planning.

By writing off Rs. 5 lakhs u r incurring a loss of Rs. 5 lakhs in financial terms, unless Mr. X is repaying the money in black.

So in effect, you will get a tax benefit of maximum Rs. 21,000 (30% of Rs. 70,000), but you will also incur a loss of Rs. 5 lakhs. Net effect will be loss of Rs. 4,79,000

CA Hardik Bunha

CA Hardik Bunha (Querist)
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17 November 2011 Sir, Writing of loans is a bad debt ??? My friend this is not a business transaction then how bad debt.
Sirji writing of loans is capital loss and u write section 71 How???

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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17 November 2011 I assumed that the loan was for business purpose.

If it is not for business purpose, under which head are you claiming it as a loss??

It is not covered under the chapter of Capital Gains.

Section 70 deals with set-off of loss under one head with income under the SAME HEAD.

Writing off loans is not covered under the head Capital Gains.

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