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TAX Doubt

Nitin Hotchandani (student) (100 Points)

23 September 2010

Mr.. M doing retail trade in garments.......received50000 on 12-2-2010 being amount due from Mr. X relating to electronic goods supplied by M's father, which was written off as Bad debts by his father in assessment year 2004-2005 and allowed as Deduction....M's father died in august, 2005......wat is TAX implication?????

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11 Replies

Sunshine (Helping All) (10575 Points)
Replied 24 September 2010

it wont be a business income as it was his father's business which i assume is discontinued...so it will be taxable under IOS i think..

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MudraMantri (Wantapreneur) (491 Points)
Replied 24 September 2010

Section 41(4) on bad debts recovery states that where a deduction has been allowed in any earlier year and the bad debts is subsequently recovered , the amount so received shall be deemed to be the business income and chargeable to tax.

However, in case of PK Kaimal it was decided that were any amount is received in PY that was allowed as deduction for bad debts in any earlier year but where there is change in asssesse the amount would not be taxable and the same would be deemed to be Capital Receipts not liable to tax..

The same would apply here as well.

Dinesh Kumar Agarwal (Article clerk) (117 Points)
Replied 24 September 2010

P K kaimal case does not applied in above case. in p k kaimal case a partnership firm dissolved and afterwards p k kaimal runs the the business as proprietorship thus the assesse not the same.

In the above case it is case of legal heir/inheritance thus the assesse is continued as per section 41 (4) and thus it is a taxable income in the hand of assessee.

Nitin Hotchandani (student) (100 Points)
Replied 24 September 2010

according to me bad debts recovered from discontinued business of father...it is chargeable to tax u/s 176(3A), being a receipt from discontinued business......section 41(4) not applicable.........

Yuvraj Shreekant Sharma....reason for not applicable of section 41(4)-----the assessee has received rs.50000 as bad debts written off by his father relating to electronic goods business....as the assessee is not carrying on the same business, he can not be taxed for the sum received....unless the same business is succeded, no amount can be treated as deemed income u/s 41(4).....

Nitin Hotchandani (student) (100 Points)
Replied 24 September 2010

reason--- why section 176(3A) is applicable--------

where any business is discontinued by reason of the retirement of death of the person carrying on such business, any sum received after the discontinuance of the business is deemed to be the income of the recipient and charged to tax in the year of recipt.....

so dis income is taxable under the head of income from business nd profession........

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Nitin Hotchandani (student) (100 Points)
Replied 24 September 2010

sneha bagla------it wont be a business income as it was his father's business which i assume is discontinued...so it will be taxable under IOS i think..,,

answer-----u read my above two reply.....

now wat ur answer.....ye b&p me taxable hogi....ok........

tc......my all fnds.........

Dinesh Kumar Agarwal (Article clerk) (117 Points)
Replied 24 September 2010

YOU HAVE REPLACED THE WORD PROFESSION TO BUSINESS REFER TO SEC. 176 (4).

I THINK I AM CORRECT

Nitin Hotchandani (student) (100 Points)
Replied 24 September 2010

yes dinesh u r correct...but my dear bro mene section 176(3A) ka provision likha h......

section 176(3A) related to business.......nd 176(4) related to profession.//////

now i think u agree with me......if u have ny doubt plz post ur reply....or u have ny suggestion plz post....

i think now i clearify both sections....

Dinesh Kumar Agarwal (Article clerk) (117 Points)
Replied 24 September 2010

[(3A) Where any business is discontinued in any year, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the person who carried on the business had such sum been received before such discontinuance.]

(4) Where any profession is discontinued in any year on account of the cessation of the profession by, or the retirement or death of, the person carrying on the profession, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the aforesaid person had it been received before such discontinuance.

read section 176 3A and 176 4 now i think that may come know the wordings of thses section. u have written wordings of 176 4 wherein profession is replaced by business

Sunshine (Helping All) (10575 Points)
Replied 25 September 2010

Originally posted by : Nitin Hotchandani
	sneha bagla------it wont be a business income as it was his father's business which i assume is discontinued...so it will be taxable under IOS i think..,, answer-----u read my above two reply..... now wat ur answer.....ye b&p me taxable hogi....ok........ tc......my all fnds.........