In a major relief to flat owners, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that no income tax is payable on exchange of old flats in lieu of old ones.
The bench of Sandeep Gosain (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that it is a case of extinguishment of old flat and in lieu thereof, the assessee has got new flat as per the agreement entered with the developer for redevelopment of the society. Thus it is not a case of receipt of immovable property for inadequate consideration that would fall within the purview of the provisions of section 56(2)(x) of the Income Tax Act.
The appellant/assessee, Anil Dattaram Pitale had purchased a flat in the financial year 1997-98 in Mahavir Nagar Tristar Co-op Hsg Society. The society underwent redevelopment as per the agreement entered with the developer. As per the terms and conditions of the agreement, the assessee got a new flat in lieu of the old flat surrendered by him. The stamp duty value of the new flat was Rs.25,17,700/-. The indexed cost of the old flat was Rs.5,43,040.
The AO assessed the difference between the above said values amounting to Rs.19,74,660 as income of the assessee under section 56(2)(x) of the Income Tax Act. The LdCIT(A) confirmed the same.
As per Section 56(2)(x) of the Income Tax Act, From April 1, 2017, if a person receives something for free or at a low price, it may be taxed as “income from other sources”—especially if it’s money or immovable property (like land or buildings). In other words it means that if you get real estate for free, and its stamp duty value exceeds Rs. 50,000, the entire stamp duty value is taxable.
The tribunal noted that this transaction may attract the provisions relating to capital gains, in which case, the assessee should be entitled for deduction of cost of new flat under section 54 of the Income Tax Act. In that case, there will be no tax liability upon the assessee on account of these transactions.
The ITAT held that the tax authorities are not correct in law in assessing the transaction under section 56(2)(x) of the Income Tax Act.
The tribunal quashed the order passed by CIT(A) and directed the AO to delete the addition made by him under section 56(2)(x) of the Income Tax Act.
Case Details
Case Title: Anil Dattaram Pitale Versus Income Tax Officer
Case No.: ITA No. 465/Mum/2025
Date: 17-03-2025
Counsel For Appellant: Dr. K. Shivaram a/w. Mr. Shashi Bekal
Counsel For Respondent: Shri Kiran Unavekar, Sr.DR
