Anant Ramchandra Dhotre Vs ITO (ITAT Mumbai)
Redeveloped Flat on Surrender of Tenancy Rights Taxable as Capital Gains; Section 54F Relief Allowed: ITAT Mumbai
Material Facts: The assessee, who had inherited tenancy rights in a Municipal Corporation property at Dadar, Mumbai, surrendered those tenancy rights pursuant to redevelopment of the building. The original tenanted premises measured about 441 sq. ft., which, after adding fungible area, came to approximately 600 sq. ft. Under the redevelopment arrangement, the assessee was initially to receive a flat measuring 730 sq. ft. However, following litigation before the Bombay High Court regarding re-allotment, the Court directed the developer to allot the assessee an 830 sq. ft. flat on the 22nd floor, pay hardship compensation of Rs.14,50,000, and bear stamp duty and registration charges. The assessee also paid Rs.4,60,000 to the developer for additional amenities.
The Assessing Officer treated the additional 230 sq. ft. received in the redeveloped flat as a benefit taxable under section 56(2)(x). Based on the stamp duty value, the Assessing Officer computed the value of the additional area at Rs.35,34,870, reduced Rs.4,60,000 paid for amenities, and added Rs.30,74,870 as income from other sources.
Procedural History
The assessment was completed under section 143(3) read with section 144B. The Commissioner of Income Tax (Appeals)/NFAC confirmed the addition, holding that the additional 230 sq. ft. represented a distinct benefit taxable under section 56(2)(x). The assessee appealed before the ITAT Mumbai.
