23 January 2008
If a person is staying in flat in an old building, and builder says him that he will construct a tower on that land after demolishing the existing building. Once the tower is built person will get his flat back in new tower with additional facilities.
Builder gives him the following compensation: -
1. Rent for the period from the date construction to the date the tower is built, or he may provide accommodation also. 2. Compensation for shifting. 3. Compensation for getting right to construct tower in his flat.
What will be treatment in income tax of these receipts
23 January 2008
I don't know how a flat owner will be able to give permission to construct a tower without the consent of other flat dwellers as the flat owners jointly own the entire landed property on which the flats stand.
In any case assuming he has the right, then
1. Rent is only a reimbursement-no problem. 2. Compensation for shifting plus 3. Compensation for giving the right will be capital receipts (reliquishment of right in a capital asset)from which actual expenditure in relation to shifting will be deducted and the net amount is, depending upon the number of years the flat was held, considered a long term or short term capital gain as the case may be.
23 January 2008
actually he is the sole owner of the property so he has the right allow construction
as regard your reply that rent is a reimbursement----- then under which head will it be taxable----because such payament will be traeted as expense by the builder...... so some income is bound to arise in the hands of the owner?
as regard your reply to point no 2 & 3 is concerned can you please quote the relevant sections applied by you
29 February 2008
1. What I meant was if the person constructing the tower meets out the rent payable by the owner occupying an alternate rented accommodation during the contruction period, then it is only a reimbursement of what was spent, effectively no income accruing to the owner.
Section 2(47) relinquishment of any right regarded as transfer.
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