Fundamental query

This query is : Resolved

Mr. PM (Querist)
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21 July 2013 Is capital receipt taxable?
A ltd recd MONETARY PENALTY by its supplier as the supplier had not completed the construction of its PLANT/Factory and their initial contract stated that in case constrction is not completed by particular date, 10 lakh rupees wud hav to be paid. Such damages are thus CAPITAL RECEIPTS in the hand of A Ltd. How will this be taxed? In cap gains or other income? or not taxed at all being a CAPITAL RECEIPT????

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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21 July 2013 The receipt can not be treated as capital gain as there is no transfer of capital asset.
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The valuation of the WIP or Capital Asset has to be adjusted by Rs. 10.00 lac.
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