S. 54F : Capital gains-Investment in a residential house-Tenancy rights-Redevelopment-Income from other sources-Flat received on surrender of tenancy rights-Not taxable u/s. 56(2)(x)- Exemption u/s 54F allowable. [S. 2(14), 2(47), 45, 56(2)(x)]
The assessee claimed exemption u/s 54F in respect of a flat received from the developer on surrender of tenancy rights in a redevelopment project. The AO treated the tenancy arrangement as a sham / colourable device, held that the assessee had no genuine tenancy rights, and taxed the stamp duty value of the flat of Rs. 11.68 crore u/s 56(2)(x) as income from other sources. The CIT(A) deleted the addition. On appeal by the Revenue, the Tribunal held that the assessee had produced substantial documentary evidence including rent receipts, electricity bills, registered tenancy agreement, MHADA verification records and Permanent Alternate Accommodation Agreement, which clearly established existence of valid tenancy rights. Tenancy rights are a capital asset u/s 2(14) and surrender thereof amounts to transfer u/s 2(47). The flat received in exchange was consideration for transfer of tenancy rights and therefore the transaction fell under the head “Capital Gains” and could not be taxed u/s 56(2)(x). Since the assessee had invested in a residential flat, exemption u/s 54F was allowable. The allegation that the tenancy was a sham merely because the arrangement was between family members was rejected. Accordingly, the order of the CIT(A) deleting the addition and allowing exemption u/s 54F was upheld and the Revenue’s appeal was dismissed. (AY. 2020-21 ) (ITA No. 8251/Mum/2025 dt. 06.03.2026 )
ITO v. Varun Jaisingh Asher (Mum.)(Trib.) www.itatonline.org.
[Coram : Hon’ble Shri Anikesh Banerjee, JM and Hon’ble Shri Girish Agrawal, AM]