No Tax on Redevelopment Flats u/s 56(2)(x) of Income Tax Act: ITAT
Receiving a new flat in place of an old one is a case of ‘extinguishment’ of property rights rather than an income-generating transaction
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) in a decision, has held that The value of a new apartment acquired during a renovation project could not be taxed as "Income from Other Sources" in accordance with section 56(2)(x) of the Income Tax Act of 1961. Read More: ₹2,500 Crore GST Demand on Coca Cola: Bombay HC Stays Revenue Proceedings after Noting Infirmity...
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) in a decision, has held that The value of a new apartment acquired during a renovation project could not be taxed as "Income from Other Sources" in accordance with section 56(2)(x) of the Income Tax Act of 1961.
In this appeal, Anil Dattaram Pitale, the assessee challenges the 30-09-2024 order issued by the Ld CIT(A), NFAC, Delhi, which pertains to the Assessment Year (AY.) 2018–19. The Ld CIT(A)'s ruling approving the AO's addition of Rs. 19,74,660/-under Act § 56(2)(x) has angered the assessee.
The appeal is barred by limitation by 54 days. The assessee has filed an affidavit explaining the delay.
The number of projects being renovated has increased in Mumbai. Over 31,000 redevelopment projects had been approved as of last May. Chartered accountants claim that the ITAT ruling provides clarity to building owners who have decided to remodel their structures or intend to do so. It ensures that unfair taxes won't be imposed on them.
In 1997–1998 a Pitale bought a flat in a housing society. In December 2017, a new apartment was given to him as part of the society's renovation. As regards to tax in Pitale's hands under the heading "Income from other sources," the IT officer assessed the difference between the stamp value of the new apartment (Rs 25.17 lakh) and the indexed cost of the old apartment (Rs 5.43 lakh) as Rs 19.74 lakh in the assessment for the fiscal year 2017–18.
The two member bench of B.R. Baskaran, Accountant Member and Sandeep Gosain, Judicial Member ruled that receiving a new flat in place of an old one is a case of ‘extinguishment’ of property rights rather than an income-generating transaction. Further noted that this is not a case of receipt of immovable property for inadequate consideration. It is a legitimate transaction involving the replacement of an existing asset with a new one.
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