Tax on compensation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2014 A and B were staying together with their mother ( who is the owner of the flat after their father passed away) in a flat since 20 years. The flat was purchased by their father 20 years ago who expired 15 years back in Rs 2 lacs.

The mother gifted ( by gift deed) the flat to A by a gift deed and A got the flat registered in his name by paying stamp duty and registration fees ( total Rs 50,000) to the registrar.

Now A wanted his brother B to vacate the flat But B refused to do so. B mentioned that he has also contributed to the maintenance of the flat and he has been staying there for last 20 years with his family ( wife and 2 children) and he has no other place of accommodation. Amicably the matter was settled.

A decided to pay Rs 20 lacs (approximately 50% of the market value of the flat) to B in the nature of Relocation amount so that B will move out of the flat. A Family Compensation Agreement was signed on a stamp paper of Rs 100 but neither notarised or registered.

B then with a loan of Rs 10 lacs purchased a house of Rs 30 lcas.

What will be the tax treatment of Rs 20 lacs in the hands of A and B?