Tenancy Rights

[PrateekKumar Khemka]

Mr. X is a tenant in Building XYZ which is in a dilapidated condition. He is a tenant from the last 10 years have tenancy rights in the property. He is in possession of 1000 sq.ft. as a tenant.

In the year 2018, the landlord wants to demolish the existing building and build a new building in the same place. The tenant enters into an agreement with the landlord for vacancy of tenancy in lieu of another flat of 1000 sq.ft. in the remodeled building. The tenant shall pay to landlord ₹ 1500/sq. ft. against this new flat to meet the cost of construction or additional expesnes.

In the year 2020 the landlord transfers 1000 sq.ft. to the tenant on ownership basis after receiving payment of ₹ 1500/sq ft. Stamp duty value of flat as on registry date is 5000/sq. ft.

Queries:

1. How shall the amount paid as Tenancy Right i.e., 3500/sqft be construed in the books of Landlord/Developer? Whether FMV or the amount received in consideration be considered as revenue. Considering Sec 43CA?

In this case, can any specific decision be referred?

AI Summary

Tenant's Payment for New Flat: Fair Market Value or Received Amount? Guidance Sought Under Section 43CA. A tenant in Building XYZ, which is in poor condition, has been residing there for ten years with tenancy rights over 1000 sq.ft. In 2018, the landlord planned to demolish and rebuild the property. An agreement was made for the tenant to vacate in exchange for a new 1000 sq.ft. flat in the remodeled building, with the tenant paying 1500/sq.ft. for construction costs. In 2020, the landlord transferred ownership of the flat to the tenant after payment. The query seeks guidance on how the payment should be recorded in the landlord's books, considering Section 43CA, and whether the fair market value or received amount should be treated as revenue.