Redevelopment Project – Purchase of additional area by existing member of society – consideration received by the builder held to be proceeds from right in the saleable area and not towards the sale of flat.
Sec 50C shall not apply in case of builder and developer offering income under the head profits and gains from business or profession.

Assessee is a builder and developer partnership firm following project completion method of accounting. They undertook redevelopment of a building. Certain members purchased additional area in the redeveloped building. During AY 2018-19, an agreement for permanent alternate accommodation with one of the members was registered.

The case was selected for scrutiny and addition was made by comparing stamp duty value of the flat and consideration paid for the additional area purchased. Further, the addition was made u/s 50C.

Deleting the addition, the Hon’ble ITAT held that the entire addition is made on the misunderstood fact that the consideration is received for the sale of the flat whereas the assessee has received consideration towards only the additional area of the flat.

The Hon’ble ITAT further held that the assessee builder has received the consideration towards right in the saleable area additionally received by the member and not towards the sale of the flat.

Further, S. 50C shall not apply wherein the assessee is a builder and developer and has offered the said income under the head profits and gains from business or profession.