Tax treatment on receiving back of forfeited money

Advance money will not taxable and if u received excess of advance money taxable under other income.

If he failed to deliver the property because of fault on his behalf then why did he forefietted the advance ? Further you could have sued him for non performance of the specific contract

One view can be taken that the excess money which you are now receiving is for surrendering your right to acquire that land and hence there is a transfer and such excess shall be liable to be taxed under the head capital gain.

Advance money forefieted is income for the receiver from 1.04.14 [S.56(2)(ix)]

Excess amount received will be taxable as capital gains. Refer K.R.srinath case.

Thanks All, I got the answer and reference is here below:

It will be treated as capital asset as the definition of transfer in relation to capital asset includes

(i) the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein

Treatment in the hands of buyer

• Due to default on the part of vendor : vendee receives some compensation besides the refund of the earnest money paid by him, such compensation shall be subject to capital gains as it will amount to relinquishment of a right by the vendee. [CIT V. Vijay Flexible Container (1990)186 ITR 693(BOM) and K.R.Srinath v. Asst.CIT (2004)268 ITR 436 (MAD)].