Section 51
This query is : Resolved
16 March 2014
hi,
well advance and earnest money forfeited by assesse is a capital receipt and should be deducted from cost of acquisition when such asset is sold afterward. but if such asset is gifted instead of selling then in hands of new owned such forfeited amount is not deducted as he did not received income.. my question is if asset gifted what treatment will be given to advance money forfeited by original owner??
well advance and earnest money forfeited by assesse is a capital receipt and should be deducted from cost of acquisition when such asset is sold afterward. but if such asset is gifted instead of selling then in hands of new owned such forfeited amount is not deducted as he did not received income.. my question is if asset gifted what treatment will be given to advance money forfeited by original owner??
18 March 2014
1. The advance money forfeited is to be reduced from the cost of acquisition.
2. At the time of computing capital gain, the advance will be reduced from the cost of acquisition.
3. However, gift is exempt. Accordingly, capital gain will not be computed.
Therefore advance forfeited will have no treatment in the hands of the previous year.
2. At the time of computing capital gain, the advance will be reduced from the cost of acquisition.
3. However, gift is exempt. Accordingly, capital gain will not be computed.
Therefore advance forfeited will have no treatment in the hands of the previous year.
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18 March 2014
Does it means no tax is levied on amount forfeited if asset is transfer by the way of gift?
18 March 2014
Yes no tax is levied on the forfeited amount if asset is transferred by way of gift.
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18 March 2014
ok it implies that capital receipt is not liable to tax .. so why we deduct it from cost of acquisition at the time of calculating capital gain in case original buyer sells the property?
sorry to bother you
sorry to bother you
19 March 2014
Advance forfeited by an assessee is reduced from the cost of acquisition by virtue of Section 51.
Further if the advance forfeited EXCEEDS the cost of acquisition, the excess is a capital receipt which is NOT taxable.
Further if the advance forfeited EXCEEDS the cost of acquisition, the excess is a capital receipt which is NOT taxable.
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