Tax Help Please!

Tax queries 586 views 2 replies

Sid

None

46 Points Joined June 2009

My uncle sold a piece of land to a friend in oct 08 who got the registration of sale deed done by paying 10% amount and the rest PDC's...which bounced.
the 10% which my uncle got he invested in REC bonds and subsequently filed a case u/S 138 and 420 on his friend for the bouncing of cheques

now 31st July is approching and his taxability seems to be in a mess!

Someone advised him to fill his return without the capital gain portion and the interest income earned under the "Income from other sources" head....does that make sense?

he does not want to evade tax, and never has, but if he has to pay capital gain, he has no money to do so!

can he get an extension from filing his return on capital gain as the case is pending in the court?

What should he do?

Replies (2)

Prabeer

B. COM (H) CA & CS Final

5484 Points Joined December 2007

Really a serious problem.

Can you please tell me the full form of REC bonds ??

Anumanchipalli Sathikonda

Tax Consultant

1559 Points Joined June 2009

Mr.Sid

Please provide the recital in the sale deed. Is there any condition that the sale will be completed i.e. the title in the property will be transfered only after realization of the cheque. Section 45 of Income-tax Act, says --

Any profits or gains arising on transfer of a capital asset effected in the previous year shall, save otherwise provided in sections 54, 54B, 54D, 54E, 54EA,54EE,54F,54G, and 54H, be chargeable to income-tax under the head income from capital gains, and shall be deemed to be the income of the previous year in which the transfer took place.

Hence it is important to know whether the transfer is effected or not? If the transfer is effected even though the full sale consideration is not received it is a difficult case. Any how the courts may take a liberal view not to tax the income which is not really received and which is in litigation.

But the assessing officer may not help in any way, as he is bound to follow the section?

There is a case law K.P.Verhese Vs. ITO 131 ITR 597 (SC) where the court held depending upon the facts of the case the language in the section may be modified in favour of the assessee. Ir is also a case regarding capital gains but the facts are different.

We can take the ratio of that case 131 ITR 597 (SC) for our help here in this case.

Please go through the recital in thesale deed carefully. Please study the case law 131ITR597(SC) carefully.

Best Wishes

Sathikonda