Builder paying compensation to the occupants for alternate accomodation till the completion of construction of building. What is the tax treatment for this?
B. Umapathy (student) (405 Points)
10 December 2012Builder paying compensation to the occupants for alternate accomodation till the completion of construction of building. What is the tax treatment for this?
CA Kumar Mukesh
(CA CMA FINAL and Advance Excel Trainer)
(6881 Points)
Replied 10 December 2012
It part of cost of asset
since it is given by building developer so its part of cost inventory
Jayalakshmi Anshuman
(Chartered Accountant)
(69 Points)
Replied 10 December 2012
The general rule under Income tax laws is that if payment is for the purpose of business, it is generally allowed as deduction even if the payment of damages increases profits and reduces future expenses.
Damages / compensation for failure to fulfil the contract in time are deductible, provided the asset involved under the agreement is not a capital asset.
In your case, as building is a stock in trade for the builder, the payment made to occupants should be allowable as a stock-in-trade. However, one needs to check the contracts / agreements between the builder and the occupant before taking a final decision.
B. Umapathy
(student)
(405 Points)
Replied 10 December 2012
What is the tax treatment in the recipient view?
CA Abhilasha Bhagat
(ACA)
(466 Points)
Replied 10 December 2012
It will be taxed as income from other sources in the hands of recipient.
CS,CA F,Numrologi TusharSampat
(CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert)
(85930 Points)
Replied 10 December 2012
Firstly it is an income as per definition of income under section 2(24) and it is not capital reciepts since it is only temporary income for temporary period and for temporary purpose.
CA Sourabh Goenka
(Chartered Accountant)
(249 Points)
Replied 10 December 2012
it will be taxable as other income...
B. Umapathy
(student)
(405 Points)
Replied 10 December 2012
can we claim rent paid from that income as deduction?
CS,CA F,Numrologi TusharSampat
(CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert)
(85930 Points)
Replied 10 December 2012
IF THE INCOME AS MENTIONED IS TAXABLE UNDER INCOME FROM OTHER SOURCE THEN ANY EXP INCURRED WILL BE ALLOWED UNDER SECTION 57 IF THAT EXP IS NOT DISALLOWED U/S 58.
CA Sourabh Goenka
(Chartered Accountant)
(249 Points)
Replied 10 December 2012
no expenses from income will be allowed.. because if rent is paying on house, then it is a personal expenditure.. and not allowed as deduction..
CS,CA F,Numrologi TusharSampat
(CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert)
(85930 Points)
Replied 11 December 2012
| Originally posted by : CA Sourabh Goenka | ||
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no expenses from income will be allowed.. because if rent is paying on house, then it is a personal expenditure.. and not allowed as deduction.. |
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If income earned is in relation of the house for paying rent and it is taxable under the head income from other source then rent paid in relation to such house will be allowed.
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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