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Income tax

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(Querist)
08 January 2013 A flat was purchased from DLF for Rs. One crore to be completed within 36 months. DLF delayed possession upto five years.
DLF paid Rs 18 lacs as 'Penalty for delayed Completion' of this real estate contract'

Question. I wish to know whether this penalty is taxable in the hands
of receiver? or can it be reduced from cost of the flat?
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ramprasad

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ramprasad (Expert)
09 January 2013 The right receive the compensation represents a right distinct from the right of the possession of the house property. Hence relinquishment of such right for the consideration would attract the capital gain tax.
In determining the amount of the capital gain the cost of acquisition of the asset has to be deducted. As the cost of acquisition cannot be determined, capital gain is not chargeable to tax.
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