TAXABILITY OF COMPENSATION RECEIVED ON SALE OF FATHER'S PROPERTY

[MVK TAXAUDIT]

Mr. A had sold a property to Mr. X. Later daughter of Mr. A files a case on Mr. X that even she was entitled for a share in father's property. Then Mr. X pays certain amount to daughter of Mr.A to take back the case ( off the court settlement ). ( Note : daughter is not party in the sale deed )

what will be the tax treatment for the amount received by daughter of Mr. A. Whether it is taxable under the capital gain or income from other sources ?

[DR.MARIAPPAN GOVINDARAJAN]

In my opinion it is income from other sources.

AI Summary

Income from other sources: settlement received for relinquishing an alleged property claim treated as taxable income. A payment to a non party daughter to withdraw her claim to a share in her father's property, made as an off court settlement after a sale to a purchaser, is treated as income from other sources rather than capital gains.