Advance money received on sale of plot

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Nikita Khandelwal (Querist)
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26 November 2011 Sir,

I wanted to know what will be the treatment in case advance money is received against sale of plot and the same is forfeited.

Normally it is reduced from Cost of Acquisition but if advance money is more than Cost of Acquisition of asset, then what should be the treatment and also what will be the treatment when the asset is actually sold.

I also would like to mention that the registry was cancelled by the Registrar due to some case pending on that property

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)
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26 November 2011 According to provisions of Section 51 of the Income Tax Act, 1956 any advance received and forfeited afterward , then it will be deducted from the Cost of Acquisition. But when Advance amount is more than Cost of Acquisition then the , whole amount will be considered as Capital Gain and Cost of Acquisition will be zero.

In case of sale of property the cost of acquisition as well as improvements and expenses of sale/ transfer will be deducted to acheive capital gain.