ITAT Clarifies Holding Period Rules for Redeveloped Flats

When an old building is rebuilt, flat owners may receive a new and larger home.

The tax department wanted to count the ownership period from the date the final agreement for the new flat was signed.

In this case, that would have made the sale short-term because the flat was sold only eight days later.

The Mumbai ITAT disagreed.

It said the owner’s rights may have continued from the original flat or from the earlier redevelopment agreement.

Because the taxpayer had rights connected to the property for several years, the gain was treated as long-term.

This can affect the tax rate, indexation, and certain exemptions.

But the decision applies to its specific facts and later redevelopment transactions may be governed by different rules.

Homeowners should keep purchase, redevelopment, allotment, and agreement documents and obtain professional advice.