Dear All,
I have a query regarding treatment and taxability of compension received. For an example, Mr. A has given a Loan Advance of Rs. 20,00,000/- to Mr. B. But Mr. B has gone abroad and forgot about it. Then Mr. A has filed a petition in court and recovered a total amount of Rs. 42,00,000/- by the order of the court. How is this amount treated in accounts of Mr. A? And also what are the Tax Implications on the same? Please quote any Case Law related, if any.
Amount over 20 lacs shall be assessed under income from other sources.
Firstly intt on 20 lakhs shall be added in 20 lakhs
then excess over 20 lakhs and intt shall be chargable to tax.
its an business receipt under section 28 and chargable to tax u/s 28.
and intt is also taxable u/s 56 as I/O/S.
Thank u very much. But is there any chance that is not taxable? Because I learnt that Compensations for losses or damages are not treated as income and hence not taxable. Please explain the charging section for compensation, if any.
CAclubindia
