Development rights is not covered under section 56(2)(x):  ITAT Mumbai

 

The main issue revolved around the alleged addition of income from other sources under Section 56(2)(x) of the Income Tax Act, based on the difference between the development agreement of properties and their stamp duty value.

Issue before Tribunal:

Whether a development agreement is covered by section 53A of TOPA or by section 56(2)(x)?

Assessee’s Submission:

The counsel appearing for assessee argued that it did not purchase the properties but acquired development rights through agreements. The assessee company is involved in construction and development projects, including SRA projects. The provision of section 56(2)(x) or section 53A of the TOPA is not applicable to the transaction.

Tribunal’s Ruling:
The ITAT found that the assessee had only acquired development rights, not the properties themselves, and therefore Section 56(2)(x) did not apply. The tribunal emphasized that the rights acquired were for development purposes and did not constitute possession under Section 53A of the Transfer of Property Act.

For this, the Hon’ble ITAT made a reference to the Supreme Court in the case of Seshasayee Steels (P) Ltd. vs. ACIT, which clarified the application of Section 53A and the concept of possession in development agreements.

The Income Tax Appellate Tribunal (ITAT) Mumbai bench has ruled in favor of the assessee for the assessment year 2020-21.

The Copy order is as under:

1721920748946 (1)