Flat booking rights as capital asset: surrender proceeds treated as long-term capital gain, with section 54/54F relief open

An enforceable right arising from flat booking or allotment was treated as a capital asset, and surrender of that right amounted to a transfer by relinquishment. Because the right had been held for more than 36 months, the surplus received on cancellation was characterised as a long-term capital gain rather than income from other sources or a revenue receipt. On that basis, the consequential claim for exemption under section 54/54F had to be considered in accordance with law, and the receipt was held taxable under the capital gains head with corresponding exemption relief open for examination.

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Issues: Whether the surplus received on cancellation and surrender of flat booking rights was taxable as income from other sources or assessable as capital gains, and whether the assessee was entitled to consequential relief under section 54/54F.

Analysis: The booking/allotment of a flat created an enforceable right in immovable property, which falls within the expression "capital asset". The right was held for more than 36 months and its surrender amounted to relinquishment of that capital asset, attracting the definition of "transfer". The compensation received on surrender was therefore referable to transfer of a capital asset and not to a revenue receipt. Following the binding precedent on identical facts, the receipt was assessable as long-term capital gain. Once this character was accepted, the consequential claim for exemption under section 54/54F had to be examined in accordance with law.

Conclusion: The issue was decided in favour of the assessee. The surplus on surrender of booking rights was held to be a capital gain, and the assessee became entitled to consequential consideration of exemption under section 54/54F.

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