Hardship allowance from developer is a capital receipt: ITAT Indore

Hardship allowance from developer is a capital receipt: ITAT Indore

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Hardship allowance from developer is a capital receipt: ITAT Indore

Taxation of amount received by existing owner at the time of redevelopment  agreement is often an issue of controversy and litigation.
Here is a case with similar issue before ITAT Indore, as under:
Shri Lawrence Rebello
 (ITA No.132/Ind/2020)
Short Facts & Overview of the case:
The assessee being a flat owner in a housing society receives certain sum from developer as corpus fund towards hardship caused to flat owners on redevelopment.
The assessee did not offer the sum to tax as he opined that the hardship compensation is a capital receipt and not to be regarded as income as defined U/S 2(24) of the Income Tax Act.
However AO regarded the same as a revenue receipt and treated the compensation as income from other sources.
Hon’ble ITAT held as under:
 ITAT Mumbai Bench in the case of Smt. Delilah Raj Mansukhani Vs. ITO, ITA No.3526/Mum/2017, order dated 29.01.2021 by following the order of coordinate bench of the Tribunal in the case of Shri Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 concluded that the amount received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax and, therefore, the Bench directed to delete the addition.
We are compelled to hold that the benefit received by the assessee in the form of bigger size of flat and amount received as hardship allowance from the developer is a capital receipt, which cannot be treated as revenue receipt for taxing as income
In short, the issue is again decided in favour of assessee and against the department. ITAT Indore has followed the ratio laid down by ITAT Mumbai. There are various other cases where in the similar ratio was laid down.
Taxpayer can also refer below case on the issue:
Compensation received by flat owner in redevelopment agreement and its taxation – ☛ https://thetaxtalk.com/2021/06/24/compensation-received/

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