|Question And Answer|
|Subject:||Cost of acquisition for a flat received after re-development|
|Answered by:||Advocate Shashi Ashok Bekal|
|Tags:||Capital Gains, cost of acquisition, Re development, redevelopment|
|Date:||April 19, 2022|
my dad was a tenant and the redevelopment agreement was signed then. He passed away and consequently it was transferred to my mom. She signed the PAA in 2019 and we finally have sold the flat in 2022. what can be the cost of acquisition in this case. its very confusing answers that i am reading. Appreciate your help here
The cost of tenancy is Nil. The cost of the flat on the date of conversion of tenancy will be considered as the cost of acquisition of the Flat. On the sale of Flat after a period of two years, the same will be treated as Long term Capital Gain.
The Hon’ble ITAT – Mumbai (Special Bench) in the case of DR. D.A. IRANI v. First ITO  7 ITD 160 (Bombay) (SB) where assessee, who had tenancy right over a flat in a building, acquired ownership right and thereafter sold the flat within five months, it was held that for purposes of computation of short-term capital gain on transfer of composite rights, market value of tenancy right as on date of acquisition of ownership right should be taken into account for determining cost of composite rights.
The Hon’ble Bombay High Court in the case of CIT v. Dr. D. A. Irani  234 ITR 850 (Bom)(HC) where Assessee having tenancy rights over a flat since 1962 acquired ownership rights in 1976 and sold it within five months of acquisition. The same was held to be short-term capital gains as the tenancy stood extinguished.
Thus, to summarize, the cost of the flat on the date of conversion of tenancy to ownership will be the cost of acquisition of the flat. The sale of the Flat will attract long term capital Gain.he cost of tenancy is Nil. The cost of the flat on the date of conversion of tenancy will be considered as the cost of acquisition of the Flat. On the sale of Flat after a period of two years, the same will be treated as Long term Capital Gain.
What will the cost of acquisition of property which is received by my father as gift from his father, However this property was redeveloped property prior to transfer to my father.
What will be the cost of acquisition when this property will be sold by my father?