Income tax on flat received under consent decree

This query is : Open

Aditya kumar Jain (Querist)
Follow

13 April 2018
Dear Experts,

Sincere Greetings,

My friend owes flat of about 500 Sq. Feet in ownership Co-operative Housing Society since last 45 years in Mumbai.

Since last 9 years he is having litigation with builder who has illegally constructed additional floors above existing old building of Society wherein my friend stays.

Now, builder has compromise with my friend and filed consent decree in Court. And as per consent terms builder has given two new flats of 500 Sq. Feet each of value about 50 lacs each in newly constructed building to my friend and he has surrendered his existing old flat to builder.

My query:

(1) As 2 new flats of total value 1 Crore is registered in my friend’s name, (a) will my friend get inquiry from income tax department to give explanation about 1 Crore rupees and/or for any other purpose? (b) Whether my friend is liable to pay any Tax on 1 Crore rupees?

(2) If my friend dispose off / sell either both or one flat then, whether he is liable to pay income tax on money which he get by selling said flat/s?

(3) If he has to pay income tax on amount which he get by selling said flat/s, then what are the legal remedy so that he get minimum liability of taxpaying?

Rgds,
A Jain.

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
Follow

13 April 2018 as your friend has got two flat worth of rs 100 lakh in lieu of old flat and hence it will be transfer u/s 45 of the income tax act . your friend has to pay tax on rs 100 lacs minus FMV value of old flat as on 1/4/2001 after indexing . but becuase he has got the flat in lieu of old house, it will be eleigible for exemption u/s 54 ,

Aditya kumar Jain

Aditya kumar Jain (Querist)
Follow

14 April 2018 Sunilji thank you very much for your guidance, which would help a lot.

But, Sir may I request you, if possible, to throw some light on point Nos. 2 & 3 of my query.

Once again, thank you very much and in any events I will always appreciate the guidance given by you.

Rgds,
A. Jain.

Upgrade to CAclubindia Pro. Subscribe Now!

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
Follow

16 April 2018 REGARDING POINT NO 2, IF UR FRIEND SELL THE FLAT , WITHIN TWO YEARS OF ALLOTMENT, THAN IT WILL BE SHORT TERM CAPITAL GAIN. BUT PRACTICALLY, IF U IMMEDIATELY SALE THE FLAT, THAN CIRCLE RATE / MARKET PRICE WILL ALMOST BE SAME , HENCE NO PROFIT , NO CAPITAL GAIN

REGARDING POINT NO 3, IGF GAIN ARISES , BETTER U PAY TAX RATHER GOING FOR SOME TAX EVASION METHOD

Aditya kumar Jain

Aditya kumar Jain (Querist)
Follow

16 April 2018 Sunilji thank you very much for your guidance.

What I understand from your reply is that- "2 new flats are obtained in lieu of old flat and under Court Consent Decree, if the same are sell/disposed off and if there is no price difference i.e. incurred any profit, my friend will not have to pay any Income Tax".

Kindly correct me if I m wrong.

Once again, thank you very much and I will always appreciate co-operation rendered by your goodself.

Regards,
A Jain.

CA SUNIL K GARG

CA SUNIL K GARG (Expert)
Follow

17 April 2018 sir pls understnad, as u have recd the flat for rs 100 lacs , hence that will be cost of aqusition for u . if u sell the flat above rs 100 lacs , u will pay capital gain tax on the difference, depending on period of ur holding