Ad-Free CAclubindia and daily updates on your mobile. Subscribe Now!

Asset addition or revenue income?

Venugopal (B.Com) (67 Points)

24 April 2015

Insofar as Non-Refundable Security Deposit from the Developer in a JDA of land, should it be treated as an Asset/Capital Addition while filing IT returns or as Revenue income?

Reply
Follow
Share

3 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 27 April 2015

If the deposit received for the purpose of the business of the company and if it is NON REFUNDABLE, the same would have been already taxed in the year of receipt since in case of Income tax, all non refundable deposits received are treated as income / expense in the year of receipt / payment.

Check out the previous period's Income tax returns and confirm whether the same has been offered for tax. If it is the case, then you can take that amount as Income in the books. But kindly check the details of the party from whom u received the deposit and confirm the existence of that party before taking to income. This may serve as a back up for your treatment.

Upgrade to CAclubindia Pro. Subscribe Now!

Venugopal (B.Com) (67 Points)
Replied 29 April 2015

Sir, the party giving the deposit is genuine and the year of receipt is current. The land owner is an individual and for developing and constructing flats an initial amount is given by the Developer as Non-refundable deposit. Once the construction gets over in 2 years time the land owner gets his proportionate share of the constructed area. So can this Non-refundable deposit be clubbed with his share of the constructed area as 'Asset' or is it treated separately as 'Income'?