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Award from consumer forum - taxability

Tax queries 709 views 3 replies

Chintan Shah

534 Points Joined October 2009

Dear friends,

One of our clients had purchased a car. Within a few days they discovered a defect in it and went to consumer forum. The forum awarded a compensation of Rs. 10 Lacs to them. Out of this Rs. 4 Lacs have been received in F.Y. 2009-10. The rest is outstanding and will be received in next FY. There are 2 questions:

1. What is the nature of this receipt? Is it capital receipt? If Yes, whether it is taxable?

2. If this is taxable whether the entire award of the forum will be taxable in AY 2010-11 or only Rs. 4 Lacs will be taxable in AY 10-11 and rest in AY 11-12?

Thx in advance,

Chintan

Replies (3)

CA Priya

CS Final

1049 Points Joined September 2009

Hey.... This receipt is in nature of a Capital in nature and it will be taxable...... It'll be taxable in parts like how u mentioned in the second part...... Cheeeeers.......

Max Payne

employed

2574 Points Joined May 2008

Capital receipt, but not taxable.

nikhil.r.gondhalekar

articled assistant

64 Points Joined January 2010

Hi, I think in no case it will be not taxable.As transaction involves transfer as per 2(47),extinguishment of right.For computation, one has to look into the facts of the case,If comensation is towards cost of Car.then yes whole amt is taxable on first receipt.