S. 56 : Income from other sources-Re development-Alternative accommodation of New flat of bigger size allotted from the builder in extinguishment of the old flat as per the redevelopment agreement -Cannot be assessed under section 56(2)(x) of the Act-A the most the said transaction may attract capital gains in which case the assessee should be entitle for deduction of cost of new flat u/s. 54 resulting in no tax liability-Addition is deleted. [S. 45, 54]
The assessee, Anil Dattaram Pitale, owned a flat in Co-op Housing Society, which was purchased in FY 1997-98. The society underwent redevelopment, as per the agreement with developer .As pert the terms and conditions of the agreement the assessee was allotted a new flat of bigger size . The AO assessed the difference between the stamp duty value of the new flat and the indexed cost of the old flat, as income from other sources u/s. 56(2)(x) of the Income -tax Act based on the stamp valuation . The order of the AO is affirmed by the CIT( A). On appeal the Tribunal held that the transaction is part of a redevelopment agreement, resulting in the extinguishment of the old flat and acquisition of the new flat, this is not a receipt of immovable property for inadequate consideration. Therefore provisions of section 56(2)(x) is not applicable. Tribunal also held that at the most the said transaction may attract capital gains in which case the assessee should be entitle for deduction of cost of new flat u/s. 54 resulting in no tax liability. The Tribunal directed to delete the addition made u/s. 56(2)(x). (AY. 2018-19) ITA No. 465/Mum/2025 dt. 17-3-2025)
Anil Dattaram Pitale v. ITO, (Mum)(Trib.) www.itatonline.org
[Coram : Hon’ble Shri B.R. Baskaran, AM And Hon’ble Shri Sandeep Gosain, JM]