Taxman denied exemption on 3 floors after Rs 75 lakh builder deal; ITAT grants relief
A man who inherited leasehold land and later sold it to a builder was denied tax exemption on three floors of the building. The Income Tax Appellate Tribunal later granted relief, overturning the earlier decision.
In 1997 the man inherited 400 square yards of leasehold land from his late mother. By the end of 1999 he had entered into an agreement with a real‑estate developer who agreed to pay him Rs 75 lakh for the site. The developer constructed a multi‑storey building and sought exemption from tax on three of its floors, arguing that the transaction qualified under existing provisions for relief.
The tax authority rejected the exemption request, stating that the leasehold nature of the land and the scale of the development did not meet the criteria for the benefit. The man appealed the decision to the Income Tax Appellate Tribunal, contending that the exemption was essential to make the project financially viable. After reviewing the case, the tribunal granted relief, allowing the exemption for the three floors and directing the tax department to adjust the assessment accordingly.
The ruling has implications for other leasehold owners who plan to partner with developers. It clarifies how tax exemptions are applied in similar situations and may encourage more landowners to negotiate fair deals. For readers in India, the case highlights the importance of understanding tax provisions before entering large construction agreements, especially in rapidly growing urban areas.
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