2025 (4) TMI 84 - AT - Income Tax

Property Received Through Redevelopment Agreement Not Taxable Under Section 56(2)(x) of Income Tax Act

The ITAT Mumbai allowed the taxpayer's appeal against an addition of Rs. 19,74,660 made under Section 56(2)(x) of the Income Tax Act. The case involved a ... Addition u/s 56(2)(x) - assessee got a new flat vide registered agreement in lieu of the old flat surrendered by him - difference between the stamp duty value of the new flat and the indexed cost of the old flat - HELD THAT:- Assessee got a new flat in the redeveloped property in lieu of old flat. Hence, 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 sec.56(2)(x). Accordingly, we are of the view that the provisions of sec.56(2)(x) will not be applicable to the facts of the present case. At the most, 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 u/s 54 of the Act. In that case, there will be no tax liability upon the assessee on account of these transactions. The tax authorities are not correct in law in assessing the impugned transaction u/s 56(2)(x) - Decided in favour of assessee. This appeal against the Ld. CIT(A) decision for AY 2018-19 challenges an addition of Rs.19,74,660 under section 56(2)(x). Delay in filing (54 days) was condoned. Facts: the assessee surrendered an old flat in a redevelopment and received a new flat by registered agreement; stamp duty value of the new flat was Rs.25,17,700 and indexed cost of the old flat Rs.5,43,040. Tribunal found this to be an 'extinguishment of old flat' and held that it is not a case of receipt of 'immovable property for inadequate consideration' falling under sec.56(2)(x). The Tribunal stated that 'the provisions of sec.56(2)(x) will not be applicable to the facts of the present case.' It observed the transaction may attract capital gains and the assessee 'should be entitled for deduction of cost of new flat u/s 54,' concluding there would be no tax liability and directing deletion of the addition. Appeal allowed.