Sheela Daniel Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, in the case of Sheela Daniel vs. ITO, has ruled that the receipt of a free flat during Assessment Year (AY) 2007-08 is not taxable as income from other sources. The Tribunal held that the relevant section of the Income-tax Act, 1961—specifically Section 56(2)(v), as it stood during that period—was limited in its scope to cover only the receipt of a “sum of money” and did not extend to the receipt of immovable property without consideration.
Background of the Case
The case involved an appeal filed by the assessee, Sheela Daniel, challenging the order of the National Faceless Appeal Centre (NFAC) for AY 2007-08. The assessment had been reopened by the Income-tax Officer (ITO) based on information that the assessee, a member of the Greater Bombay Cooperative Housing Society Ltd., had received a free flat (A-302 at Dhiraj Diamond) as part of a society settlement.
The Assessing Officer (AO) determined the value of the flat, which included the cost of the flat, stamp duty, registration, and development charges, to be ₹19,18,875/-. The AO treated this entire amount as taxable income under Section 56(2)(v) of the Act, which deals with “Income from other sources.” The AO’s addition was made on a protective basis, as the substantive addition was made in the earlier AY 2006-07. The Commissioner of Income Tax (Appeals), or CIT(A), upheld the AO’s protective assessment order, leading the assessee to file an appeal before the ITAT.
