Got 2 flats worth Rs 1.38cr for tenancy rights; taxman sent notice, what ITAT said
The Income Tax Appellate Tribunal (ITAT) in Mumbai ruled that a taxpayer should not be taxed on the value of flats received in exchange for surrendering tenancy rights during a redevelopment project. The court rejected the tax department's attempt to classify the property value as 'income from other sources' under Section 56(2)(x).
Why it matters
This ruling provides significant legal clarity for tenants involved in redevelopment projects, protecting them from unexpected tax liabilities on replacement housing.
This is the case of a man who surrendered his tenancy rights and got flats from the builder in lieu of that. He was then served an income tax notice for the same. He fought a long battle, and finally won relief from ITAT Mumbai.He was a tenant in Mumbai in a housing society that was slated to undergo redevelopment. He received two flats in the redeveloped building in return for surrendering his tenancy rights.The tribunal ruled that a tax demand under Section 56(2)(x) could not be imposed on the individual merely because he received two flats in exchange for giving up his tenancy rights in the redevelopment project.What the case is aboutThe man had been a tenant of four shops in a Mumbai housing society.
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