ITAT Relief for Redevelopment Property Owners: ₹1.3 Crore Tax Addition Quashed.

No Tax Before Possession: Tribunal Says Under-Construction Property Cannot Be Treated as “Received”

The Mumbai Bench of the Income-Tax Appellate Tribunal (ITAT) has delivered major relief to property owners involved in redevelopment projects by deleting a ₹1.3 crore tax addition imposed under Section 56(2)(x) of the Income-Tax Act. The case involved a taxpayer who had entered into two redevelopment agreements in December 2017 for new commercial shops. Although the combined stamp duty value of the proposed shops was ₹1.3 crore, the redevelopment project was still under construction and possession had not been handed over. The ITAT ruled that merely registering a redevelopment agreement does not mean the taxpayer has “received” the new property. The tribunal noted that possession and the right to enjoy the property had not yet arisen. It also held that the new shops were provided in exchange for relinquishing existing tenancy rights, meaning the transaction involved consideration and was not a gratuitous transfer. The ruling could provide significant tax relief to redevelopment property owners.