Income earned on investment made in real estate

D R Meharwade (CA in Practice ) (5 Points)

19 January 2022  

Hello Sir/Madam,

In our scenario, we have invested Rs.1 crore from our business funds in our friend's real estate business with the agreement that whenever the land's value gets appreciated,he has to sell the land and pay us the full consideration. Accordingly when the value of land was Rs.1.20 crore, he has sold the land and paid us the entire amount of Rs.1.20 crores . The cost of acquisition of land to my friend was Rs. 80 lakhs.

1) Kindly guide us with how to account the excess 20 lakhs received from my friend in our books of accounts and also in his books of accounts.

2)Under which head it becomes taxable? Land was not transferred in my name nor it was agreed to p[ay/receive any interest.  

3) Can it be treated as business income for me?