Rahul jain (LEARNING & TEACHING) (435 Points)
04 March 2014gud evng frnds...
mr. x ready to sell his property to mr. y at rs. 25lac. and mr. y paid 10 lac rs . in advance.
after six month the contract is cancelled and mr. y filled suit against mr . x. as per court decison mr.x shulod pay rs. 15 lac. now my question is that the amt. rs. 5 lac which is excess paid by mr. x can he include the rs. 5lac in his purchase consideration. and yake indexation benifit as well whenever he sell his property....????
plz reply.....
Z
( )
(2965 Points)
Replied 06 March 2014
I dont think that it can be treated as COI(or COA). In my opinion its a capital loss having no tax treatment.
There is breach of contract & the payment has been made to make good the loss to the buyer. It cant be said that said sum was paid to protect the right On property since the same has been willfully entered in by the assesse himself .
Further if you draw inferences from pgbp cases ,Such expenses are specifically allowed u/s 37(1) . If it would be possible to treat this sum as COI then courts would have directed that that exp should not be allowed u/s 37(1) but should be considered in capital gain. Secondly deduction u/s 37(1) can be allowed if expense is for business & ITS NOT IN NATURE OF CAPITAL EXPENSE. Since courts have taken a view that such expense be treated as revenue then probably they are also of view that such expenditure is not a capital expenditure EVEN PUT THIS CASE ASIDE but even then it should not ed allowed cause assesse himself does this to sell the property
But it depends on judge
IF ANY ONE HAS ANY CASE LAW OR OTHER VIEW POINT I WILL BE MORE THAN JUST HAPPY TO HEAR
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