Redevelopment flat taxation: section 56 addition failed where old flat rights were surrendered and extra area was bought at stamp duty value.

Section 56(2)(vii)/(x) did not sustain an addition on a redevelopment transaction where the assessee surrendered the existing flat and received a new flat in exchange, because the relevant year's provision covered only receipts without consideration and the later inadequate-consideration limb could not be applied retrospectively. Treating the stamp duty value of the entire new flat as free receipt ignored the value of the surrendered rights in the old flat. For the separately purchased additional area, the record showed that the consideration paid was not less than the relevant stamp duty value. No addition was therefore sustainable for either the redeveloped portion or the additional area.

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Issues: Whether addition under section 56(2)(vii)/(x) of the Income-tax Act, 1961 could be sustained in respect of a redeveloped flat where the assessee surrendered the old flat and acquired the new flat partly in exchange and partly by payment for additional area.

Analysis: The assessee had entered into a redevelopment arrangement and gave up the existing flat as consideration for the new flat received on redevelopment. The statutory provision applicable to the year of the redevelopment agreement covered receipts without consideration, while the later amendment bringing inadequate consideration within its scope could not be applied to the earlier year. The addition made by treating the stamp duty value of the entire new flat as if it were received free of cost ignored the surrendered rights in the old flat. For the additional area purchased separately, the material on record showed that the consideration paid was not less than the relevant stamp duty value.

Conclusion: No addition under section 56(2)(vii)/(x) was sustainable either for the redeveloped area received in exchange for the old flat or for the separately purchased additional area.

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