Rental Income in the Nature of Compensation for Alternate Accommodation from the developer is not Taxable: ITAT [Read Order]

Rental Income - Nature of Compensation - Alternate Accommodation - developer - Taxable - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT) Mumbai has ruled that rent received for alternate accommodation is not eligible to tax and deleted the enhancement of assessment made by the revenue.

The assessee, Smt. Delilah Raj Mansukhani was given compensation for alternative accommodation of Rs.2,60,000 as per in terms of Development agreement by M/s. Calvin Properties The Commissioner of Income Tax CIT(A) was of the opinion that the amount received was over and above the rent actually paid by the assessee and therefore, the same has to be taxed accordingly. Notice was issued, under section 251(2) proposing enhancement. This was replied by the assessee submitting that received monthly rental compensation during the year aggregating to Rs.2,60,000 for the alternative accommodation which was a compensation on account of her family displacements from the accommodation and tremendous hardship and inconvenience caused thereby. Hence submitted that the said compensation is a capital receipt and therefore, is not liable to be taxed. However, the CIT(A) rejected the contentions and enhanced the assessment to the extent of Rs.2,60,000/- by holding that assessee has not paid any rent.

Judicial Member Amarjit Singh and Accountant Member Rajesh Kumar allowed the appeal of assessee and relied on decision of the Co-ordinate Bench in the case of Shri Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 where it was held, “the amounts received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax”

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