Tax Relief to Unauthorized Colonies: CBDT revises Definition to extend Benefit to Colonies of NCT Delhi [Read Notification]

The Central Board of Direct Taxes (CBDT) has recently amended the definition of ‘unauthorized colonies tax relief under the newly inserted rule 11UAC wherein it was clarified that ‘unauthorized colony’ shall have same meaning as assigned to it in section 2(b) of the NCT of Delhi (Recognition of Property Rights of Residents in Unauthorised Colonies) Act, 2019.

Rule 11UAC was inserted to provide that provisions of Sec. 56(2)(x) shall not be applicable to any immovable property received by a resident of the unauthorized colony.

Unauthorized colonies are the residential colonies constructed without seeking the required permission for the layout or building plans. Consequently, conveyance deed for these colonies is not registered by the registrar/sub-registrar unless these are regularised by the Government.

Last year, the Central Government introduced new legislation to regularise 1,728 unauthorized colonies as per which, the ownership rights of residents in these unauthorized colonies shall be recognized. The Central Board of Direct Taxes (CBDT) had also issued a notification to exempt these residents from any tax liability that may arise under Section 56(2)(x) from such a regularization process. This was introduced after the Supreme Court decision in case of Suraj Lamp & Industries (P.) Ltd. v. the State of Haryana wherein it was held that the transaction of purchase and sale of properties in these colonies is evidenced by a Power of attorney, possession letters, etc. which does not convey any title in the property.

“unauthorized colony” shall have the same meaning as assigned to it in clause (b) of section 2 of the National Capital Territory of Delhi (Recognition of Property Rights of Residents in Unauthorised Colonies) Act, 2019 (45 of 2019)’,” the Central Board of Direct Taxes (CBDT) tax relief Notification said.

Section 56(2)(x) of the Income Tax Act, 1961 provides that where any person receives money, immovable property or specified movable property from any person without or for inadequate consideration then the money or difference between the value of property so received and actual consideration thereof is chargeable to tax as income from other sources in the hands of the recipient, subject to certain conditions.