India, April 14 -- In a big relief to homeowners in Mumbai and other cities whose projects are undergoing redevelopment, the state Income Tax Appellate Tribunal (ITAT) has held that the cost of a new flat provided to a homeowner during a redevelopment project ought to be exempted from tax as 'Income from Other Sources' under Section 56(2)(x) of the Income Tax Act.

"Receiving a new flat in lieu of an old one is a case of 'extinguishment' of property rights and not a case of receipt of immovable property for inadequate consideration. Hence the ITAT rightly ruled in favor of the taxpayer," says Vivek Jalan, partner, Tax Connect Advisory Services.

The ruling clears the air regarding taxes on such transactions. "It says that a new flat in re...