pls help in the amendment for the A. Y. 2010-10

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2010 Method of accounting Section 145

Interest received on compensation or on enhanced compensation will be taxable on cash basis.

Can anybody explain this amendments briefly.......

Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 May 2010 yes w. e. f. 01.04.2009 interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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12 May 2010 As per section 145(1), income chargeable under the head “Profits and gains of business or profession” or “Income from other sources”, shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.
Sec 145A is amended to provide that the interest received by an assessee on compensation or on enhanced compensation shall be deemed to be his income for the year in which it is received, irrespective of the method of accounting followed by the assessee

Further, a new Clause (viii) has been inserted in section 56(2) to provide that income by way of interest received on compensation or on enhanced compensation referred to section 145A(b) shall be

assessed as “Income from other sources” in the year in which it is received. Further newly inserted section 57(iv) to allow a deduction of 50% on such income.

example
Mr. Zoozoo received Interest on enhanced compensation received by during the previous year 2009-10 is Rs. 120000. Out of which Rs. 50,000 relates to the previous year 2007-08, Rs.70000 relates to previous year 20008-09 . Compute taxable amount of Interest.

solution
As per section 145A interest received by an assessee on compensation or on enhanced compensation shall be deemed to be his income for the year in which it is received. Hence entire interest of Rs.120000 would be taxable in AY. 2010-11

Interest on enhanced compensation _______________________________ 120000
Less: Deduction under section 57(iv) [120000 * 50%] _________________60000
Interest taxable under the head “IFOS” _________________________________60000

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Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2010 thanks for the reply mr. Manmohan and Aditya sir