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Capital gains

K. P.S (34 Points)

09 October 2019

Whether advance received in transfer of capital asset should be reduced r no???

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7 Replies

CA Dhruva Kalamanji (Chartered Accountant ) (1996 Points)
Replied 09 October 2019

Dear K P S

kindly eloborate on facts of the case

Kapadia Pravin (17249 Points)
Replied 10 October 2019

Any advance received by you from buyer of property is to towards consideration of sale of capital asset only.

Obviously the buyer will pay the balance amount only.
Where is the problem in this ??

K. P.S (34 Points)
Replied 10 October 2019

Ex: if iam selling my house property for 10l and the is ready nd he paid advance of 50k, nd the bal he was unable to pay so forfeited,, now iam gng to sell the same house to another party now whether I must reduce 50k in sale price r no??

Kapadia Pravin (17249 Points)
Replied 10 October 2019

50000/- forfeited amount will reduce your cost of house property and that reduced cost of house property will be considered as and when you sale house property

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K. P.S (34 Points)
Replied 10 October 2019

There will be any indexcation for that 50000

Suresh Thiyagarajan (Student) (3986 Points)
Replied 11 October 2019

1. Receipt of advance money forfeited is dealt in sec 56(2)(ix), where the amount received towards sale of the capital asset and subsequently got forfeited then the same will be subject to tax under the head Income from other sources in the year of receipt.
2. As per sec 51, if the advance amount is already taxed then the same will not go down to decrease the cost of acquisition at the time of sale of the property.
3. In your case, Rs. 50,000 received will be taxable in the year of receipt as IOS. Once, you have paid tax on the same, again it need not be reduced from your cost of acquisition.
Please correct me if the above solution has an alternative view.