Cash Compensation For Delay In Flat Handover Not Taxable Under Section 50C

BRIEF FACTS OF THE CASE¹

• Suvarna Chandrakant Bhojane ('the Assessee'), had entered into a development agreement for construction of flats on her land.
• As per the terms of the agreement, the Assessee was to receive certain flats in lieu of her land.
• The agreement provided that if the developer was unable to deliver the flats within the stipulated timeline, he shall pay cash compensation to the Assessee.
• Since, the Developer was unable to construct the flats within the stipulated timeline, he paid interest amounting to INR 1.85 crores as compensation to the Assessee.
• The Assessee offered this income to tax under the head "Income from Capital Gains".
• However, the Assessing Officer ('AO') invoked the provisions of Section 50C of the Income-tax Act, 1961 ('the Act') thereby contending that the stamp duty value shall be taxed and accordingly offered the stamp duty value of INR 3.51 crores to tax under the head Income from Long Term Capital Gains.