Suggest me the correct treatment

Dear Colleagues,

Your suggestions required on the following.

Lets say a person has a property of Rs. 5 Lacs in his Balance Sheet. If the same is sold to other person for Rs. 25 Lacs. Now if the person receives the payment of Rs. 10 Lacs & the purchaser is not able to make any further payments. Rs. 10 Lacs is now forfeited by the seller. The question is what should be the treatment of this Rs. 10 Lacs? Please mention the provision & case law if you cite. Also, tell me the treatment if the same is sold for 7 Lacs?

 

Thanks in Advance

Replies (2)

friend, the amout forfieted will be deducted from the cost of acquisition of property as a result the amount of property will become nil and the excess balance will be taxable at a higher slab rate of 30%. Next time when the property will be sold the cost of acquisition will be nil and tax be computed accordingly.

no...he is wrong

cost will be reduced to nil nd balance 5 lakh will be a capital receipt not taxable

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