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Section 51

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if I have received an advance for transfer of a Capital Asset before 1.4.2014 and it has been forfeited after 1 .4 .2014 my doubt is whether it should be taxed under capital gains or income from other sources?
Replies (2)

Income from other sources.

1. According to sec 51, any amount received as an advance for transfer of Capital Asset and subsequently got forfeited the same will go down to decrease the Cost of acquisition of Capital Asset until 31.03.2014. 
2. However, from 01.04.2014 any amount received as advance and subsequently forfeited the same will be taxable under the head Income from other sources u/s 56(2)(ix). It is important to note here that advance money should be retained by the transferor in order to tax under this section. If it's been returned there won't be any tax implications.
3. With respect to your question, since the amount was forfeited after 01.04.2014, only at the time when the money was forfeited sec 56(2)(ix) will come in operation and not at the time of receipt of advance. Hence, advance money received before 01.04.2014 and subsequently got forfeited after 01.04.2014 will be taxable u/s 56(2)(ix) under the head Income from Other Sources. 
Please correct me if the above interpretation has an alternative view.


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