Letter of Allotment and Receipt of Immovable Property

ISSUE FOR CONSIDERATION

Section 56(2) provides for the taxability of certain receipts, which inter alia include the receipt of any immovable property, either without consideration or for a consideration which is less than its stamp duty value. When taxability of such receipts was introduced for the first time vide clause (vii) of section 56(2), it was applicable only if the immovable property was received without consideration by the assessee on or after 1st October, 2009. The Finance Act, 2013 amended the provision of clause (vii) with effect from AY 2014-15, expanding its scope to cover the receipt of an immovable property for a consideration, if the consideration was lesser than the stamp duty value of the said immovable property.

The said clause (vii) of section 56(2) was applicable only to individuals and HUFs. However, thereafter, the Finance Act, 2017 made clause (vii) inapplicable to receipts after 31st March, 2017. Receipts subsequent to that date were brought to tax under clause (x) in the hands of all types of assessees. The taxability under both these clauses is subject to further conditions and several exclusions.

In the real estate market, when the immovable property is bought from a builder in a project which is underconstruction, it is a common practice that the builder will first issue a lette