2025 (4) TMI 84 - AT - Income Tax

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.

Summary

**Judgment Summary: ITAT Mumbai****Case Details:**- **Tribunal Members:** Shri B.R. Baskaran (Accountant Member), Shri Sandeep Gosain (Judicial Member)- **For the Assessee:** Dr. K. Shivaram, Mr. Shashi Bekal- **For the Revenue:** Shri Kiran Unavekar, Sr. DR- **Appeal Relates to:** Assessment Year 2018-19**Key Issues:**- The assessee challenged the order of the CIT(A), which confirmed an addition of Rs. 19,74,660/- made by the AO under Section 56(2)(x) of the Income Tax Act.- The appeal was initially barred by a 54-day delay, which was condoned after considering the assessee's affidavit explaining the delay.**Facts:**- The assessee originally purchased a flat in 1997-98, which was later redeveloped. In exchange for the old flat, the assessee received a new flat under a redevelopment agreement.- The AO assessed the difference between the stamp duty value of the new flat and the indexed cost of the old flat as income under Section 56(2)(x).**Tribunal's Findings:**- The Tribunal noted that the transaction involved the "extinguishment of the old flat" and acquisition of a new flat, not a receipt of immovable property for inadequate consideration.- It was determined that Section 56(2)(x) was not applicable in this scenario.**Legal Reasoning:**- The Tribunal suggested that the transaction might instead be subject to capital gains provisions, where the assessee could claim a deduction for the cost of the new flat under Section 54, resulting in no tax liability.- Consequently, the Tribunal found the tax authorities' application of Section 56(2)(x) to be incorrect.**Conclusion:**- The Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition made under Section 56(2)(x).- The appeal filed by the assessee was allowed.**Order Pronounced:** March 17, 2025.