Manoj Devshichhadva Vs ITO (ITAT Mumbai)
Section 56(2)(x) Cannot Tax Redevelopment Flat Before Possession: Alternate Accommodation Is Not Received Without Consideration
The Mumbai ITAT held that section 56(2)(x) cannot be invoked merely because a redevelopment agreement has been executed and registered, where the redevelopment project is incomplete and the assessee has not received possession of the permanent alternate accommodation. The Tribunal observed that the charging provision under section 56(2)(x) is attracted only when an assessee actually “receives” an immovable property during the relevant previous year. Mere registration of a redevelopment agreement creates only a contractual right to receive a flat in future and does not amount to receipt of immovable property, particularly when the building is under construction and no occupation certificate or possession has been granted.
The Tribunal further held that the allotment of the alternate premises was not without consideration, as it was granted in exchange for the assessee’s valuable tenancy rights under the redevelopment scheme. Such a reciprocal commercial arrangement cannot be equated with a gratuitous transfer contemplated under section 56(2)(x). Relying on its earlier decisions in Snehalata Heramb Dhayagude, Anil Dattaram Pitale, and Amar Narendra Joshi, the Tribunal reiterated that a redevelopment transaction involving surrender of tenancy or ownership rights may, at best, raise issues under the capital gains provisions, but cannot be taxed as receipt of immovable property without consideration under section 56(2)(x). Accordingly, the addition of ₹1.387 crore made under section 56(2)(x) was deleted and the assessee’s appeal was allowed.
Cases Discussed
- Snehalata Heramb Dhayagude v. Jurisdictional AO, Ward 16(3)(1) (ITAT Mumbai), ITA No. 258/Mum/2026
- Amar Narendra Joshi v. ITO (ITAT Mumbai), [2026] 186 taxmann.com 318 (Mumbai-Trib.)
- Anil Dattaram Pitale v. ITO (ITAT Mumbai), [2025] 173 taxmann.com 51 (Mumbai-Trib.)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. The Commissioner of Income Tax (Appeals), NFAC, dated 12-09-2025 for the Assessment Year 2018-19. The assessee has raised the following grounds of appeal:
