Case Law Details
Ajay Parasmal Kothari Vs ITO (ITAT Mumbai)
ITAT Mumbai held that compensation paid by the builder for facing hardship during redevelopment of flats is in nature of capital receipts and accordingly not liable to tax.
Facts- During the assessment proceedings, Assessing Officer observed from the capital account submitted by the assessee that assessee has shown a receipt of of ₹.3,73,191/- as a capital accounts receipt from the builders. It was submitted that assessee was having a flat in Satsang Bharti CHS Ltd., Malad (E), Mumbai and the said building has given for redevelopment and this amount is basically a monthly rental compensation from the builder for rent of alternate accommodation. The assessee was asked to why the said amount received from the builders for alternate accommodation should not be treated as income from other sources and brought to tax.
Conclusion- We observe that Coordinate Bench has considered the similar issue and adjudicated the same in the case of Smt Delilah Raj Mansukhani v. ITO has held that 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.
We also hold that the above receipt of compensation for hardship is in the nature of capital receipt. Accordingly, the addition made by the Assessing Officer is deleted. Ground raised by the assessee is allowed.
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Which bracket/head of the ITR should this be declared? Event though its not taxable – how do we show the rent received in ITR?
I have a similar situation wherein I have paid tax on the rent received from the developer during redevelopment of my building from July 2015 to Mar 2020. Is there any way to claim refund now, in view of this judgement from the honourable judges of ITAT. Your suggestion, guidance, advice in this regard would be helpful. Thank you.
TDS was deducted by builder u/s 194H and 194H(a) and return for A.Y. 22-23 was filed offering for taxation under income from other sources. Intimation u/s 143(1) was received.
What is remedy to claim refund of TDS?
Thanks for posting important judgement.
My question is if this hardship amount is treated as capital receipt, do we need to adjust this amount to cost of acquisition for capital gain calculation.
If it is a capital receipt then under which section it is exempt?