I have a practical problem of Taxing and accounting OTS (one time settlement) transaction. Plz help me in this regards.
Fact of Case:
Mr A took a loan of40 lac 3 years back. He was paying his EMI regularly. He couldn't pay his EMI for last 6 month so bank has taken OTS route to settle down his existing libilities.
As on 31/03/2011, his balance sheet shows libility towards bank loan is35 lac. As on today he has setteled his case with bank after paying25 lac only.
1. How he shall account this things in his book (Accounting point of view only)
2. How to treat differance in income tax. (i.e. whether differance 10 lac is taxable, if yes then under which section, if no then also under which section)
Thanks in advance