Dear friends,
One of our clients had purchased a car. Within a few days they discovered a defect in it and went to consumer forum. The forum awarded a compensation of Rs. 10 Lacs to them. Out of this Rs. 4 Lacs have been received in F.Y. 2009-10. The rest is outstanding and will be received in next FY. There are 2 questions:
1. What is the nature of this receipt? Is it capital receipt? If Yes, whether it is taxable?
2. If this is taxable whether the entire award of the forum will be taxable in AY 2010-11 or only Rs. 4 Lacs will be taxable in AY 10-11 and rest in AY 11-12?
Thx in advance,
Chintan
CAclubindia
