ITAT has said that if a person acquires a new flat in exchange of an old flat, he will not have to pay tax under section 56 of the Income Tax Act. This section includes the provisions of ‘income from other sources’
If you get a new flat in exchange of your old flat, then you will not have to pay tax on it. Mumbai Income Tax Appellate Tribunal (ITAT) has given this decision. It has said that if a person gets a new flat in exchange of an old flat, then he will not have to pay tax under section 56 of the Income Tax Act. This section includes the provisions of ‘income from other sources’. Let’s understand what this whole matter is.
What is the whole matter?
Anil Pitale bought a flat in 1997-98. He exchanged it for a new flat in 2017. The Income Tax Department considered the difference between the stamp duty value of the new flat and the indexed cost of the old flat as taxable income. The stamp duty value of the new flat was Rs 25.17 lakh, while the indexed cost of the new flat was Rs 5.43 lakh. This difference of Rs 19.74 lakh was considered taxable income by the Income Tax Department under Section 56 (2) (X). The Income Tax Commissioner (Appeal) also considered it correct.
On what basis did ITAT give its decision
The ITAT refused to accept this. It said that the provisions of section 56(2)(x) do not apply to such redevelopment deals. The tribunal also said that the provisions of capital gains tax should apply to such transactions. It said that if the profit from the property transaction is invested to buy a new residential property, then capital gains are exempt from tax.
A large number of taxpayers will get relief
The ITAT also said that the tax authorities have wrongly used section 52(2)(x) in this case. This order of the ITAT has provided relief to a large number of taxpayers who get a new flat in exchange of an old flat.
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