Redevelopment Flat Possession Date & Capital Gains Taxable Year
The appellant – assessed had acquired tenancy rights in 2015.
The appellant had surrendered the tenancy rights vide tripartite agreement dated 18.12.2017 with the developer & the landlord, for redevelopment of the property.
In April 2019, the possession of the flat was given.
The stamp duty valuation of the flat was made at Rs.1,49,10,000/-.
AO had treated the stamp duty as short term capital gains for the assessment year 2018-2019.
It is a fact on record that possession of alternative permanent accommodation in the new building was handed over to the assessee in April, 2019. Therefore, the taxable event of capital gain qua the surrender of the tenancy rights if at all, can only happen in Financial Year (FY) 2019-20 and not in the impugned assessment year. When the tripartite agreement between the assessee, the developer and the landlord, in specific terms provide that the tenancy rights will continue to remain with the assessee till the handing over of possession of alternative permanent accommodation in the newly developed building, the Departmental Authorities cannot interpret the terms of the agreement in a different manner. Thus, in our considered opinion, there being no transfer/surrender of tenancy rights in the year under 8 ITA No.7418/Mum/2025 Jigar Sevantilal Shah consideration, the AO cannot tax the capital gain on alleged surrender of tenancy rights in the impugned assessment year, as, the capital gain, if any, has to be assessed in the year of surrender tenancy rights in AY 2020-21. The AO is directed to delete the addition
Clauses of the Tripartite Agreement show that tenancy rights of the assessee continued till possession of the new flat was given. Possession was given in FY 2019-2020 (AY 2020-21). Therefore, no taxable gain event arose in FY 2017-2018 (AY 208-2019) as done by the Assessing Officer.
When the tripartite agreement between the assessee, the developer and the landlord, in specific terms provide that the tenancy rights will continue to remain with the assessee till the handing over of possession of alternative permanent accommodation in the newly developed building, the Departmental Authorities cannot interpret the terms of the agreement in a different manner
Order dated 17.4.2026 of the ITAT F Bench, Mumbai, in ITA No.7418 / Mum / 2025 of Jigar Sevantilal Shah Vs. Income Tax Officer Ward 19(1)(5) Mumbai
