Section 51 of income tax

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..... Section 51 of income tax
Query (Issue) Started By: - yash gupta Dated:- 17-7-2014 Last Reply Date:- 4-8-2014 Income Tax
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Income Tax
A Company has paid Advance Money[Bid] of ₹ 20 Crore to Asset Reconstruction Company for the acquisition of a liquidating company, but due to higher bid from another company the assessee company has received after 4 years its Advance Mo .....

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..... ney together with interest amounting to of ₹ 28 Crore. Now, (i) whether the interest compensation it liable for capital gain and accordingly indexation done ?? OR (ii) It is treated as "Capital Receipts " u/s.51 as a result not liable for any Tax. Kindly explain the Consequences. Reply By SANJAY DAVE: The Reply: Let me repeat the facts as I have understood them for clarity. A .....

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..... Ltd has paid an advance of 20Cr to B Ltd for acquisition of C Ltd. But A Ltd was out bid and C Ltd went to say D Ltd. Now B Ltd has returned to A Ltd 20 Cr + Interest of 8 Cr. If my above understanding is correct, then my views are as under: i) Interest will be liable for tax under Business Income or Other Sources in case of A Ltd and not as Capital Gains. So question of indexation does not ari .....

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..... se. (ii) Section 51 is not applicable to this case. Just to further clarify what Section 51 states is if C Ltd had retained the advance without returning to A Ltd ( under whatever reason/condition) the same would have been deducted from cost of acquisition of it's fixed assets. Reply By Rakesh Chitkara: The Reply: There is no question of application of section 51 in your case. You are purc .....

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..... haser. In case your amount was forfeited by seller , then section 51 would have applied to him. As regards taxability of additional income, it is be taxed. Reply By yash gupta: The Reply: Thankyou Mr. Sanjay and Mr. Rakesh. But if the Interest was already capitalised year wise than whether indexation done.
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