The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition made on the corpus fund and held that the receipt of compensation for hardship is in the nature of capital receipt and shall not be liable to tax.
The assessee is an individual and she has filed her return of income declaring total income at ₹.9,47,976/-. The Assessing Officer (AO) received information from the Income Tax Officer, Mumbai that the assessee is a member of Middle-Income Group III Co-operative Housing Society Ltd. And had entered into an agreement with M/s. Suyog Happy Homes for the redevelopment of the society and as per the terms of the said agreement, the assessee has received an amount of ₹.52,88,045/- from the developer, but the assessee has filed a return of income declaring a total income of ₹.9,47.976/-.
The AO held that the transaction of redevelopment and receipt of consideration by the individual members is purely a commercial activity and he also held that it is in the nature of dividends in the hands of the members/shareholders of the Society. Accordingly, he held that it is in the nature of dividend and is therefore exigible to the income tax in the hands of the assessee under the head “income from other sources”.
The Authorized Representative of the assessee submitted that the assessee has received a certain sum from the developer as the shifting compensation and he brought to our notice the findings of the AO.
It was further submitted that there were types of compensation received by the assessee which is the corpus amount payable by the developer to the extent of ₹.21,77,069/-, a compensation of ₹.9,50,000/- payable by the developer to the individual members to meet the expenses for shifting / re-shifting and compensation to the individual members to meet the cost for temporary transit accommodation to be arranged by the individual members during the period of construction of the proposed building at ₹.21,60,976/- for an initial period of 24 months.
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