Income tax on court order (principle along with interest)

Querist : Anonymous (Querist) 02 November 2020 This query is : Resolved
I filed a case in court and after about 7-8 years, the court issued orders that the cost of the property along with interest at 8% p.a. be returned to me by the builder. So,I received a big lump sum amount which included original cost of the flat plus interest for all the years together. My query is that how should this amount be treated for taxability in my Income tax return? - Should the total amount be taxed in the year of receipt as revenue receipt or should this be treated as capital receipt? - Should I ignore the cost of flat part and just show the interest part as income? - What should be the tax treatment of this interest part- revenue income or is this a capital receipt since it is related to a capital asset. - Should not this interest part be bifurcated over all the years to which it relates and then taxed in the return of each such year thereby reducing the tax burden,

under case title

STATE CONSUMER DISPUTES REDRESSAL COMMISSION HARYANA, PANCHKULA

Complaint No : 229 of 2016

Date of Institution: 11.08.2016

Date of Decision : 01.03.2018

1. Shalini Manuja w/o Sh. Ved Prakash Manuja, Resident of 4-R, Model Town, Panipat-132103, Haryana.

2. Satyan Manuja s/o Sh. Ved Prakash Manuja, Resident of 4-R, Model Town, Panipat-132103, Haryana.

Complainants

Versus

1. Ansal Landmark (Karnal) Townships Private Limited through its Chairman having its registered office at B-47, Connaught Place, New Delhi.

Second address: 11th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi-11001.

Ansal Landmark (Karnal) Townships Private Limited through its Chairman having its registered office at Sushant City, Sector-36, NH-1 Milestone-119, Karnal, Haryana.

Opposite Party

2. Indiabulls Housing Finance Limited through its Branch Manager having its office at F-60, 11nd Floor, Malhotra Building, New Delhi-110001.

Performa Opposite Party

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Quick Summary

If you've received a lump sum from a court order that includes the original property cost and accrued interest, you need to consider how to declare this for income tax. The key questions are whether the entire amount is a revenue or capital receipt, and if only the interest portion should be taxed. It's generally advised to consult a chartered accountant to determine the correct tax treatment, as the interest might need to be allocated across the years it relates to, potentially reducing your tax burden.

Isaac Gabriel (Expert) 03 November 2020
The return would have been accounted for in the respective year of purchase. Therefoe, revised return need to be submitted for the years distributing the income.Howrver cosult a charted accountant or CA club if India.

kavksatyanarayana (Expert) 03 November 2020
please consult a local CA for better guidance.

P. Venu (Expert) 03 November 2020
Yes, the matter require professional consultation.

Dr J C Vashista (Expert) 04 November 2020
Seek professional advise of a local chartered accountant.

Rajendra K Goyal (Expert) 04 November 2020
Generally, the National Consumer Disputes Redressal Commission order that the interest is to be paid as compensation. Tax has to be paid on interest and not on compensation. Go through the orders as it is from the State Commission.

It would be better to discuss in detail with some tax consultant.

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