Corpus received under a redevelopment agreement by a Company for flat held as Stock in trade

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Sachin (Querist)
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04 November 2022 The assessee is a Company engaged in real estate business. It holds a few apartments purchased as its stock in trade. One such apartment has gone in for redevelopment. The assessee (company and not an individual or HUF) has received an amount as corpus as part of the redevelopment process.

Questions:
1) is the amount received a capital receipt or revenue in nature?
2) can this amount received be adjusted against the cost of the flat (held as stock in trade)
3) from a tax perspective - is this a taxable receipt or tax free receipt?
4) if it is a taxable receipt under which income head should this be reported?
5) can the usual treatment of reducing the cost of acquisition by this amount for computing capital gains (in a typical redevelopment case where assessee is individual and asset is a capital asset) be applied (i.e. reduce cost of stock in trade) even in case where assessee is a company and asset is classified as stock in trade.

Opinions welcome

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 November 2022
From whom the amount is received whether it's from the government.

Sachin

Sachin (Querist)
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04 November 2022 It is received from a private builder. Not government.

Sachin

Sachin (Querist)
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04 November 2022 Tax authorities have held that corpus received under a redevelopment is a capital receipt as it is for "hardship" caused to the assessee due to redevelopment. How does classification of the underlying asset (apartment) as to whether it is capital asset or stock in trade change the nature of the receipt?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 November 2022 Treat it as capital receipt not taxable.
Adjust it against the asset held in stock.
Nature of receipt will not change it, it can be continued as stock in trade.

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