Can anyone tell me that, why a weighted deduction of 50% is received on the income u/s 56 (2)(vii), i.e. interest received on the enhanced compensation in case of compulsory land acquisition?
3 Replies
CA Ankit Totla
(Practicing Chartered Accountant)
(469 Points)
Replied 13 April 2012
Abhishek,
The deduction is given u/s 57 as per the provisions of the act.
The logic behind this might be that to earn enhanced compensation and thn recovery along with the interest for the same requires lots of legal expenses to be spent, so not allowing the actual expenses, they have provided a weighted avg deduction for the same on the int part as the compensation is already taxed under capital gains.
This is the logic which i feel might be.
CA. Abhishek K. Pandey
(Manager (Advance))
(901 Points)
Replied 15 April 2012
But, the legal expenses incurred is deductible from enhanced compensation for the purpose of calculating capital gain thereon.
Abhinav
(student)
(564 Points)
Replied 08 May 2012
Hello guys!
We studied this section just few days earlier in our class.
Interest accrues with time so accordingly interest on delayed compensation should be taxed in the relevant years. But it is deemed to accrue in the year of receipt. That means the entire amount would be taxed in the year of receipt which can push the income to a higher slab rate. So as a compromise aggrement I-T Act allows for a standard deduction of 50% u/s 57.
Ever grateful to my sir CA Subodh Shah for teaching logically.
Abhin
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