TaxTMI 
TaxTMI 
2026 (7) TMI 1406
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.... section 56(2)(x) of the Income-tax Act, 1961 ("the Act"), since the stamp duty value of the flat exceeded the amount of Rs.6,00,000/- paid by the assessee towards purchase of an additional 55 sq. ft. area. The assessee submitted that the new flat had been received under a redevelopment scheme in exchange for the old flat and the payment of Rs.6,00,000/- was with respect only to the additional area purchased from the developer. The Assessing Officer accepted this explanation and held that the provisions of section 56(2)(x) of the Act were not attracted. 3. Thereafter, on examination of the return of income and supporting documents, the Assessing Officer observed that the assessee, along with his wife, had purchased Flat No. 2 admeasuring 510 sq. ft. in the financial year 2006-07. Pursuant to a redevelopment agreement executed with the developer during the financial year 2012-13, the old building was demolished and a new flat bearing No. 503 was allotted to the assessee having the original carpet area, 30% additional area under the redevelopment scheme, 185 sq. ft. received as a gift from the assessee's mother and an additional 55 sq. ft. purchased for Rs.6,00,000/. The new f....
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....of the newly constructed flat. 5. The learned CIT(A) also rejected the assessee's contention that the gain ought to be assessed as long-term capital gain with the benefit of indexation and exemption under section 54/54F of the Act. The CIT(Appeals) held that the Assessing Officer had rightly treated the transfer of the original flat and the subsequent sale of the redeveloped flat as two distinct taxable events. Consequently, the benefit of section 54/54F of the Act, and indexed cost could not be allowed in respect of the sale of Flat No. 503, which was held for less than the prescribed period. Accordingly, CIT(Appeals) dismissed the appeal of the assessee. 6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 7. We have heard the rival contentions and perused the material available on record. The issue arising for our consideration is whether the capital gains arising from the sale of Flat No. 503 at Majala Priya Girish Vihar Co-operative Housing Society Ltd., Mumbai are liable to be assessed as Short-Term Capital Gainsor as Long-Term Capital Gains, looking into the instant facts. The other issue is wheth....
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....mises. The Permanent Alternate Accommodation Agreement neither creates ownership for the first time nor results in acquisition of an independent capital asset. It merely identifies and records the permanent alternate premises allotted in substitution of the existing premises pursuant to rights which had already accrued under the Development Agreement. Therefore, the execution of the Permanent Alternate Accommodation Agreement cannot be regarded as the starting point for computing the period of holding. 11. The controversy involved before us is no longer res integra. The Coordinate Bench of the Tribunal in Mrs. Urmila Jagdish Mehta v. ACIT, Circle 33(3), Mumbai, ITA No. 5944/Mum/2024, order dated 29.12.2025, while dealing with an identical redevelopment arrangement, after considering the judgment of the Hon'ble Bombay High Court in PCIT v. Vembu Vaidyanathan [(2019) 413 ITR 248 (Bom.)] and CBDT Circular Nos. 471 and 672, held that the issue relating to determination of the holding period in redevelopment cases stands concluded. The Tribunal observed: "The issue relating to the date of acquisition and commencement of holding period in cases of allotment of flats under....
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....each component comprised in Flat No. 503 emanated from pre-existing rights under the redevelopment arrangement and cannot be dissected into separate capital assets merely because the Permanent Alternate Accommodation Agreement was executed subsequently. 16. We are also unable to agree with the finding of the learned CIT(A) that the original flat was transferred to the developer and thereafter a new independent asset came into existence. The redevelopment agreement itself shows that the developer merely undertook reconstruction of the society building in consideration of development rights. The existing members never purchased the redeveloped flats as independent purchasers. Rather, they continued to hold their ownership interest in the land and the building, which was substituted by the permanent alternate accommodation allotted in the redeveloped structure. Thus, the redeveloped flat was continuation of the existing capital asset and not acquisition of a fresh capital asset for the first time on 12.01.2018. 17. At this stage, it is also necessary to determine the relevant date from which the period of holding is to be reckoned. The counsel for the assessee has contended that....