SMT VEENA VIJAY MURKIBHAVI,MUMBAI V. INCOME TAX OFFICER, MUMBAI

ITA 4085/MUM/2025

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The case involves Smt. Veena Vijay Murkibhavi, who received Rs. 45,98,063 from M/s Suyog Happy Homes as part of a redevelopment agreement for her residential flat. The Income Tax Officer (ITO) treated this amount as a revenue receipt taxable under Section 56 of the Income Tax Act, 1961, while the assessee contended it was a capital receipt, exempt under Section 54. The matter was initially decided against the assessee by the CIT(A), leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing decisions in similar cases involving other residents of the same society, ruled in favor of the assessee, categorizing the receipt as a capital receipt.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714445 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2009-2010
• Other Referred Cases: Mrs. Pushpa R. Chawla ITA No. 2864/Mum/2022, Mr. Laxmikant Hulgappa Renuke ITA No. 2762/Mum/2024, Smt Delilah Raj Mansukhani v. ITO ITA.No. 3526/Mum/2017, Shri Devshi Lakhamshi Dedhia vs. ACIT ITA No.5350/Mum/2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITHA KAUSHIK; DR
• Assessee Lawyers: MANDAR VAIDYA; AR
• Keywords: Set aside; Capital receipt
• Section: 148; 54; 56; 234B

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 4085/Mum/2025 Assessment Year: 2009-10 Smt. Veena Vijay Murkibhavi 503, G Wing Gade Gardens Bandra East Mumbai - 400051 [PAN: AALPM6073A] Vs Income Tax Officer अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Mandar Vaidya, A/R Revenue by : Ms. Kavitha Kaushik, Sr. D/R सुनवाई की तारीख/Date of Hearing : 04/08/2025 घोषणा की तारीख /Date of Pronouncement: 08/08/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 30/05/2025 by NFAC, Delhi [hereinafter the ‘ld. CIT(A)’] pertaining to AY 2009-10. 2. The grievance of the assessee reads as under:- “1) The learned CIT (Appeals), has erred in view of facts, circumstances and law, in confirming the action of the Assessing Officer in making addition of Rs 45,98,063 received by the Assessee from M/s Suyog Happy Homes towards the transfer / surrender relating to the re development of the Residential Flat of the Assessee, as a Revenue Receipt instead of Capital Receipt. 2) Without prejudice to the above, the learned CIT (Appeals), in view of facts, circumstances and law has erred in confirming the above receipt taxable as Income from Other Sources under Section 56 of the Income Tax Act, 1961 (hereinafter referred to as \"Act\") instead of long term Capital Gain under Section 45 of the Act and its investment in Residential House exempt under Section 54 of the Act. Printed from counselvise.com I.T.A. No. 4085/Mum/2025 2 3) The learned CIT (Appeals), has confirmed charging of interest u/s 234B of Rs. 15, 33,072/-.” 3. Briefly stated the facts of the case are that the assesse filed her return of income on 31/07/2009 declaring total income at Rs. 3,80,580/- which was revised on 25/08/2016 declaring total income at Rs. 4,92,120/-. The return was processed u/s 143(1) of the Act. 4. Subsequently, on the basis of the information received it was noticed that the society of the assessee had entered into a development agreement with the developer and the assessee being a member of the said Society has received an amount of Rs. 45,98,063/- which was not disclosed by her in her return of income and accordingly notice u/s 148 of the Act was issued and served upon the assessee and the assessment was reopened. The assessee was asked to explain why Rs. 45,98,063/- received by her should not be assessed to tax u/s 56 of the Act. In her reply, the assessee claimed that it is a capital receipt and not taxable. The contention of the assessee was dismissed by the AO who was of the firm belief that as per the development agreement in addition to the entitlement to receive the flat, the assessee has received Rs. 45,98,063/- from the developer and the same is taxable as income from other sources and made addition of Rs. 45,98,063/-. The assessee agitated the matter before the ld. CIT(A) but without any success. 5. Before us, the ld. Counsel for the assessee drew our attention to the decision of the Co-ordinate Bench in the case of Mrs. Pushpa R. Chawla ITA No. 2864/Mum/2022, one of the residents of the said society who has also received compensation from the builder for redevelopment of the society and pointed out that the Co-ordinate Bench has deleted a similar Printed from counselvise.com I.T.A. No. 4085/Mum/2025 3 disallowance which was followed by the Co-ordinate Bench in the case of Mr. Laxmikant Hulgappa Renuke in ITA No. 2762/Mum/2024 who is also one of the resident member of the same society. The ld. D/R placed strong reliance on the assessment order. 6. We have carefully perused the orders of the authorities below and the orders of the Co-ordinate Benches (supra). We find force in the contention of the ld. Counsel for the assessee. The Co-ordinate Bench in the case of Mrs. Pushpa R. Chawla (ITA No. 2864/Mum/2022), following the decision of another Co-ordinate Bench held as under:- “We observe that Coordinate Bench has considered the similar issue and adjudicated the same in the case of Smt Delilah Raj Mansukhani v. ITO in ITA.No. 3526/Mum/2017 dated 29.01.2021 and observed as under: - “5. After hearing the rival submissions and perusing the material on record, we find that compensation received by the assessee towards displacement in terms of Development Agreement is not a revenue receipt and constitute capital receipt as the property has gone into redevelopment. In such scenario, the compensation is normally paid by the builder on account of hardship faced by owner of the flat due to displacement of the occupants of the flat. The said payment is in the nature of hardship allowance / rehabilitation allowance and is not liable to tax. The case of the assessee is squarely supported by the decision of the Co-ordinate Bench in the case of Shri Devshi Lakhamshi Dedhia vs. ACIT in ITA No.5350/Mum/2012 wherein similar issue has been decided in favour of the assessee, the relevant operative portion is reproduced hereunder:- 15. We have considered the rivals submissions and perused the materials on records. We note that the assessee received compensation of Rs. 19,50,873/- from the developer when the building in which the assessee owned flat went for re-development as per the agreement between the developers and flat owners dated 28.03.2008. The said compensation was paid towards hardship Rs, 13,45,278/-; rehabilitation Rs, 5,90,625/- and for shifting Rs. 15,000/-. We also note that the assessee paid Rs. 18,63,000/- to Joys Developers for acquiring additional area of 138 Sq Ft. It was also noted that the assessee shifted to his own house when the building went for re-development. Now the question before is whether the compensation upon re-development of property towards hardship, rehabilitation and shifting received by the assessee is taxable if the potential TDR/FSI is available to the land owner or society which owns the (and depending upon the terms of the de-development agreement without transferring the land. In the present case the assessee who was flat owner in the building was Printed from counselvise.com I.T.A. No. 4085/Mum/2025 4 member of the society, As per the agreement each member of the society including the assessee was to be given a flat in lieu of the old one and the each member including the assessee was given compensation. We also note that In the decisions in 1TA No 72/Mum/2012 assessment year 2008-09 Bench E and ITA No 5271/Mum/2012 assessment year 2008-09 Bench \"D\" the Tribunal held that the amounts received as compensation for hardship , rehabilitation and for shifting are not liable to tax We, therefore , respectfully , the above decisions are of the considered view that the amounts received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax and the order passed by the first appellate authority cannot be sustained. Thus the order of CIT(A) is reversed and ground is allowed in favour of the assessee. 16. In the result, appeal of the assessee is partly allowed, as above. 6. Respectfully following the co-ordinate Bench decision, we set aside the findings of the ld. CIT(A) on this issue and direct the AO to delete the addition made of Rs.2,60,000/-. Accordingly, the ground No.6 is allowed.” 17. Respectfully following the above said decision, we are inclined to agree with the submissions of the Ld. AR of the assessee and hold that the above receipt of compensation for hardship is in the nature of capital receipt. Further, we observe that assessee has submitted that the corpus fund received by her was already declared as additional income subsequently on receipt basis in A.Y. 2015-16. Therefore, we direct the Assessing Officer to verify the same and if it is found proper, the addition on corpus fund may be deleted. Accordingly, the addition made by the Assessing Officer is deleted. Ground raised by the assessee is allowed.” 7. Due to some rectifiable mistakes, a miscellaneous application was preferred by the assessee and this Tribunal in M.A. No. 151/Mum/2024, rectifying the mistake held as under:- 4. We have given a thoughtful consideration to the order of the Tribunal and have carefully considered the computation of income which is in the paper book. We find that the aforementioned observations of the Tribunal are not only uncalled for but also have no bearing on the facts on record whatsoever. Once, the tribunal has on no uncertain terms accepted that receipt of compensation for hardship is in the nature of capital receipt, then further observations were unnecessary, uncalled for and need to be deleted. 5. Para 17 shall now be read as under:- \"17. Respectfully following the above said decision, we are inclined to agree with the submissions of the Ld. AR of the assessee and hold that the above receipt of compensation for hardship is in the nature of capital receipt. Printed from counselvise.com I.T.A. No. 4085/Mum/2025 5 Accordingly, Accordingly, the addition made by the Assessing Officer is deleted. Ground raised by the assessee is allowed.\" 8. Similar view was taken by the Co-ordinate Bench in ITA No. 2762/Mum/2024 where the decision in ITA No. 2864/Mum/2022, was followed. 9. Respectfully following the decisions of the Co-ordinate Benches, we direct the AO to delete the impugned additions. 10. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 8th August, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 08/08/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "