Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

May 2026

Where a tenant received a residential flat on the redevelopment of property in lieu of surrendering tenancy rights, the value of such flat cannot be assessed as income from other sources under section 56, since tenancy rights constitute a capital asset Therefore, its surrender is chargeable to tax as capital gains, and the assessee is eligible to claim exemption under Section 54F.

By Jagdish T Punjabi, Chartered Accountant Devendra Jain & Aditya Bhatt, Advocates
Reading Time 3 mins

11. (2026) 184 taxmann.com 174 (Mum Trib)

ITO vs. Varun Jaisingh Asher

A.Y.: 2020-21

DATE: 06.03.2026

Section: 54F, 56

Where a tenant received a residential flat on the redevelopment of property in lieu of surrendering tenancy rights, the value of such flat cannot be assessed as income from other sources under section 56, since tenancy rights constitute a capital asset Therefore, its surrender is chargeable to tax as capital gains, and the assessee is eligible to claim exemption under Section 54F.

FACTS

The assessee and his brother became tenants of a family-owned property after the outgoing tenant vacated the premises i 2013 upon receipt of ₹2.75 crores. They occupied the vacated portion and paid rent of ₹5,000 per month to the owner, supported by rent receipts and electricity bills.

Subsequently, the property was proposed to be redeveloped. The redeveloper required a formal agreement, and therefore, a tenancy agreement was registered on 5.8.2014. The owners entered into a joint development agreement on 11.08.2014; a Permanent Alter

Read More
Download PDF

You May Also Like

The revised notification enhancing the ceiling of exemption under section 10(10AA)(ii) to Rs. 25 lakhs operates only from 01.04.2023, and the benefit of the enhanced limit does not apply to employees who had retired earlier.

Merely because one of the objects in the trust deed was “advancement of any other object of general public utility”, or that the receipts from an activity exceeded the 20% threshold, it could not, by itself, be decisive to deny registration under section 12AB unless CIT(E) examined the actual activities carried on by the trust and determined under which limb of Section 2(15) the activity would fall, and whether the receipts were independent commercial receipts or were merely incidental and ancillary to attainment of the objects.