Relinqiushment under capital gains

Tax queries 512 views 2 replies

Prakash Ahuja

Tax Manager

84 Points Posted on 28 April 2014

Dear professional friends,

A client of ours has had to temporarily vacat a flat in the building he has purchased recently due to certain legal tussle going on of the builder with the local municipal authorities. As an arrangement, the client will be receiving the the goodwill payment @ Rs. 25 per square foot per month on the saleable area for a periof of 1 year till the hearing & disposal of the builders case in the Court. My questiojn is whether the goodwill payment received by the client may be counted as receipts towards the temporary relinquishment (based on the definition available in the Websters dictionary) of the property till the hearing goes, & therefore chargeable to capital gains, after which the client may get the right to reside in the flat or income from other sources. Please reply quickly.

Replies (2)

Income Tax Wala: (Fin. Expert)

Chartered Accountants

2015 Points Posted on 28 April 2014

Dear Mr. Ahuja

Relinquishment means abandoning or givingup anythings. by relinquishment a person ceases to own the assets concerned through some act on his part.

but in your case you have vacate the flat due to some legal obligation on builder here you did not give up your right on the flat.

you are paid a rent of Rs. 25 Sq . Feet and this is taxable as a income from house property in the hands of owner.

there is no question of capital gain

Mihir

Wealth Manager

5293 Points Posted on 28 April 2014

Agree with above. Your client is not giving up his right in the flat, so there is no capital gains. But he must read the document carefully against which he is to receive Rs. 25 psqf pm before signing it.