Capital gain on settlement of litigation on flate

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MUKESH MAURYA

STUDENT

27 Points Posted on 03 June 2015

Can any one help me regarding below matter (Expert Opinion Required with supporting of case law)

I have booked flate 4 year ago and given 10lacs amount i have registered aggrement and allotment letter but builder has not given the flate to me, so matter was gone in litigation. Now in May-2015 he had given me compensation to settele all matter my 10lacs+9% Interest and 30 lacs as compensation to setteled all matter.

Plz help me followin Queery??

1) 9% Interest taxable under which head Capital Gain or IFOS?

2) Extra Compensation 20 lacs taxable under capital Gain or Other Source (as word "tranfer" not use in aggrment they have use to '"settled all dues")??

3) If taxable in Capital Gain than can i take benefit under which head of 54 or 54F ??

4)If i can take beneift u/s 54/54F can i take new house in the name of my relative(like Spouse /Brother/Mother/Father or Joint with me and any close relative)??

Plz i required Your Expert opinion with supporting of case law/circular/Notification ??

You can mail me also on my id:- pintumaurya88 @ gmail.com

If you know any expert person in mumbai you can give me refrence to that person??

My mobile number 91+9029058042

I will look proper responce from all tax expert.

Thnaking You

Replies (2)

Z

Tax Consultation (US and India)

2348 Points Posted on 12 June 2015

1. It should be under the head capital gain only .Since this interest is part of compensation for non performance and is in relation to extinguishment of the rights in the property.

It is squarely covered under "full value of the consideration" U/S.48

Consideration is whatever has been received or is to be received by whatever nomenclature

2. Was the compensation awarded by the court or its by agreement of both of the parties?

If it was not awarded by the court then definitely there is a transfer because its covered under

" the extinguishment of any rights therein"

The assessee is extenguishing his right to sue for non performance of the specific contract.

There are plaethore of cases on this

(2006) 191 TAXATION 558 (MP)

"The action on the part of an assessee in giving up her right to claim the property and instead accepting money compensation is a clear case of relinquishment of a right in the property resulting in transfer as defined in section 2(47). When the legislature defines a particular type of transaction to be in the nature of transfer for taxing purpose, effect has to be given to it"

K.R.Srinath vs The Assistant Commissioner Of ... on 20 April, 2004

Commissioner Of Income-Tax vs Vijay Flexible Containers on 13 September, 1989

Equivalent citations: 1990 186 ITR 693 Bom

https://indiankanoon.org/doc/949313/

3. Exemption can be claimed u/s 54F 54 EC [BUT NOT UNDER S 54, because the transfer in this case is of "RIGHTS in the property" (Right to sue for non performance of the specific contract) and not the house property property itself.

4. Only in name of WIFE or unmarried daughter

As per Benami Transactions (Prohibition) Act, 1988

S.3. (1) No person shall enter into any benami transaction.

[(2) Nothing in sub-section (1) shall apply to-

(a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchsed for the benefit of the wife or the unmarried daughter;

Do note that if this is violated then exemption shall not be available and there are SEVERAL HIGH COURT judgements.