Jigar Sevantilal Shah Vs ITO (ITAT Mumbai)
Tenancy Rights Transfer Taxable Only on Possession: STCG Addition Deleted
The AO taxed ₹1.10 crore as Short-Term Capital Gain (STCG) on alleged surrender of tenancy rights during the year, based on stamp duty valuation. The assessee contended that surrender would occur only upon receiving possession of the new flat, as per the redevelopment agreement.
The ITAT examined the tripartite agreement and held that tenancy rights do not extinguish merely on handing over possession for redevelopment. They continue until the assessee receives permanent alternate accommodation, which in this case happened in April 2019 (next year).
Accordingly, the Tribunal held that no transfer occurred in the relevant year, and therefore capital gains cannot be taxed in that year. The addition was directed to be deleted, with taxation (if any) to arise only in the year of actual surrender.
The appeal was thus partly allowed in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal by the assessee against order dated 26.09.2025 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2018-19.
2. In Ground No.1, the assessee has challenged the validity of the assessment order on the ground that though the case was selected for limited scrutiny, however, the Assessing Officer (`A0′) has expanded its scope without following the instructions/guidelines issued by Central Board of Direct Taxes (CBDT).
