Related to redevelopment of old residential flat

This query is : Resolved

CA Manoj Pokharana (Querist)
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19 May 2014 Query

Suppose Mr. A is the owner of Flat (Holding 750 Sq. ft.) in the XYZ Apartment since 1980. In the current scenario, the condition of apartment is not good and hence the member decided for the repairs. However one of the builder ABC developers approached to the said apartment owners for the redevelopment and following are the terms which are as under:

1. Owner has to surrender the Flat (750 Sq. Ft.) And in returns 1) Flat (1000 Sq. Ft.) and 2) Cash amounting to Rs. 5,00,000/- Per flat to be received by the owner from builder.

2. Society has to surrender all the rights temporarily for re-development and in returns Rs. 1 Cr as compensation from builder.

Questions to above receipts:

1. Treatment for the said transfer to builder?
2. Is the aforesaid transfer to builder is liable for the taxation as per income tax in the hands of flat owner? And if taxable then what would be treatment for the same?
3. What about the taxability of additional space received in turn of old flat?
4. What about the taxability of Cash receipt as compensation in addition to flat received?
5. How the Compensation received by the society is liable for income tax?
6. Any supporting case law in favor as well as against the assessee for aforesaid receipt ?

CA Mohit Bansal

CA Mohit Bansal (Expert)
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21 May 2014 Mr. Manoj,
1)Yes it would be treated as taxable transaction for capital gains under IT Act
2) Sale consideration would be FMV of flat received plus any cash received
3) Income tax would also be applicable on transfer of rights