Which Head of Income????

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This query is : Resolved

Sowmya P K (Querist)

09 September 2010 Hello

A CA renders services to his client(in business) . The client settles his bill by transferring a house to the CA.

Now, can the client claim deduction u/s 37(1)?? Or, the transfer comes u/s 2(47) and he has to pay Capital Gains??

Thanks in advance

CA.Pujah

CA.Pujah (Expert)

10 September 2010 lucky CA...gets a home for services...good.
well!! both can show the value as income & expense at FMV of the property on the date of transfer.

CMA. Dinesh S Adhikari, ACMA

CMA. Dinesh S Adhikari, ACMA (Expert)

10 September 2010 If this house legally transfered then definitely it would fall under section 2(47) and therefore client will be liable to pay capital gain on the same.

On the other side, if it is settlement of CA's fees then FMV should be his professional income and would be taxable under PGBP and when CA would transfer the same house on that time that amount which charged under PGBP that will be COA of the house.

However, i have doubt about the sale consideration of the house in the hands of client because FMV will be sale consideration of any asset received in case of exchange but because there is no any exchange. Therefore, i think sale consideration would be Aggregate of services which has been provided by the CA, for which house has been transferred.

However, other should also express their view.

Regards!!!

Regards!!!

Lalit Maheshwari

Lalit Maheshwari (Expert)

10 September 2010 This transaction has two tax implipication

I Capital Gain as its transfer of capital assets , Value of service rendered would be deemed as Sales Consideration for capital gain provided it not below FMV of House
2 Deduction under business income would be availble equivalent to sale consideration

mohinder kansal

mohinder kansal (Expert)

10 September 2010 immovable property can be trfd. only by executing the regd. sale/transfer deed for which stamp duty is to be paid according to the value/agreed value of the property. treatment shall depend upon the facts whether the house belongs to assesee individually or it is business asset.

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