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Cancellation of sub lease deed

Aman chauhan (ca) (54 Points)

23 January 2019

Cancellation of sub lease deed

where i m a sub lessee and receiving premium will it attract gst or income tax ie capital gain

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10 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 23 January 2019

what premium you are receiving.
rent received by sub lessee us treated as income from other sources and taxed at slab rates.
if sub lease is cancelled there's no capital gains

MOHAMMED IMRAN (1020 Points)
Replied 23 January 2019

as per section 2(47) transfer includes ' the extingushment of any rights therein '

cancellation of sub lease amount to extingushment of rights.

if, any income arise from the above, is taxable under the head "income from capital gains "

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Aman chauhan (ca) (54 Points)
Replied 23 January 2019

premium was paid by me when the deed was executed and now the premium is paid by the sub lessee in installment part he is paying me right now and part within 12 months subject to interest so wat would be implications on such

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MOHAMMED IMRAN (1020 Points)
Replied 23 January 2019

capital gain =
full value consideration ( i.e., total premium receivables excluding interest)
less
expenses incurred wholly and exclusively for the purpose such transfer/ ( expenses incurred for cancellation of sub lease)
less
(index)* /cost of acquisition (only for remaining portion of sub lease)

* indexation benefit is available only if, the period of holding such sub lease, is more than 36 months

-interest is taxable under the head income from other sources

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Aman chauhan (ca) (54 Points)
Replied 23 January 2019

premium is paid back by the sub lessor * in installments

MOHAMMED IMRAN (1020 Points)
Replied 23 January 2019

no matter you can receive it at once or in installments, it is taxable in the year in which transfer is made (i.e., when sub lease is cancelled )

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Aman chauhan (ca) (54 Points)
Replied 23 January 2019

Final clearification required

I m a sub lessee , receiving premium on cancellation of sub lease deed from the sub lessor which was paid by me while executing the sub lease deed.
For example- if i m receiving premium of 1 cr now and 1 cr withing 12 months with respect to interest what will be be tax implications on such under income tax

MOHAMMED IMRAN (1020 Points)
Replied 23 January 2019

first of all, you have to calculate any excess amount received from cancellation of sub lease (using formula given in my first reply)
- if there is any income (excess) then, it is taxable as capital gain in the year in which such sub lease is cancelled
interest for payment within 12 months is taxable as income from other sources

as per section 145A (b) interest received by an assessee on compensation or on enhanced compensation shall be deemed to be his income for the year in which it is received
-in your e. g., full value consideration = (1cr + 1cr)

# for further information please reply

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Aman chauhan (ca) (54 Points)
Replied 23 January 2019

thankyou so very much

MOHAMMED IMRAN (1020 Points)
Replied 23 January 2019

I regret for my last comment on interest

in your case section 145A is not applicable
because, it is interest on delay payment , not interest on compensation or enhanced compensation
in your case interest is taxable either received basis OR accrued basis
- in case assessee maintain books of accounts in cash basis then it is taxable as received basis
- in case assessee maintain books of accounts in mercantile basis then it is taxable as accrued basis
# for further information please reply

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