2024 (8) TMI 1023 - AT - Income Tax

Addition being hardship compensation received from builder for vacating the existing flat for re-development purposes taxed as income from other sources - claim of the assessee is that such receipt is a capital receipt and not income - HELD THAT - As carefully perused the decision of Sarfaraz S. Furniturewalla 2024 (5) TMI 163 - BOMBAY HIGH COURT wherein the Hon ble High Court has held that any hardship allowance and rehabilitation allowance which is paid by the developer who suffers hardship due to dispossession cannot be considered as revenue receipt and same is not liable to be taxed. As undisputed fact that assessee is also receiving the hardship allowance from the developer. Thus, the amount of hardship allowance received by the assessee is not income of the assessee. Therefore, we allow ground made in the hands of the assessee.

Summary

Issues:
1. Addition of Rs. 25,21,508/- as income from other sources for receiving hardship compensation.
2. Claim of the assessee that the receipt is a capital receipt and not income.

Detailed Analysis:
1. The appeal was filed against the appellate order dismissing the appeal filed by the assessee against the reassessment order. The main grievance in the appeal was the addition of Rs. 25,21,508/- as income from other sources, being hardship compensation received from a builder for vacating the existing flat for redevelopment purposes. The assessee contended that such receipt should be considered a capital receipt and not income.

2. The assessee had not filed a return of income for the assessment order, and it was found that the payment was received from a builder when the cooperative society went for redevelopment. The assessee claimed it was a hardship allowance and submitted the development agreement. However, the assessing officer rejected the claim, resulting in the addition of the amount to the total income of the assessee.

3. The total income of the assessee was assessed at Rs. 25,16,780/- by the reassessment order. The assessee then appealed to the CIT(A), reiterating the claim that the compensation received was a capital receipt. The CIT(A) dismissed the appeal, stating that the compensation was not a capital receipt.

4. The assessee further appealed, citing a decision of the Bombay High Court in a similar case where it was held that hardship allowance paid by the developer should not be considered a revenue receipt. The tribunal considered this decision and other judicial precedents, concluding that the amount of hardship allowance received by the assessee was not income and directing the assessing officer to delete the addition of Rs. 25,21,508/-.

5. The tribunal allowed the appeal in favor of the assessee based on the decision of the Bombay High Court and other judicial precedents, determining that the hardship allowance received should not be considered as income.