JAYANT ANAND LAKHKAR,PUNE vs. INCOME TAX OFFICER, WARD 23(2)(1), MUMBAI, MUMBAI

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ITA 1736/MUM/2026Status: DisposedITAT Mumbai15 May 2026AY 2016-177 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal followed a coordinate bench's decision in an identical case, holding that the compensation received for surrendering a flat for redevelopment is a capital receipt and not taxable. Therefore, the addition made by the AO and affirmed by the CIT(A) was deleted.

What were the facts?

The assessee received Rs. 33,68,788/- from a developer as compensation for surrendering their flat for redevelopment. The Assessing Officer treated this as taxable income from other sources, while the assessee claimed it as a capital receipt.

What were the issues?

Whether compensation received by a housing society member for surrendering a flat for redevelopment is a taxable revenue receipt or a non-taxable capital receipt.

Which sections of the Income-tax Act were involved?

Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI JAGADISH

For Appellant: Shri Rajesh Athavle, Ld. C.A
For Respondent: Shri Saurabh Raskar, Ld. Sr. D.R
Hearing: 04.05.2026Pronounced: 15.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “F”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER And SHRI JAGADISH, ACCOUNTANT MEMBER ITA No.1736/M/2026 Assessment Year: 2016-17 Jayant Anand Lakhkar, Income Tax Officer, E 201, Felicta, Ward 23 (2)(1), Baner Pashan Link Road, Vs. Kautilya Bhavan, Behind RMZ Icon, Baner, Bandra Kurla Complex, Pune, Maharashtra - 411045 Bandra (East), PAN – AAUPL0051E Mumbai – 400051. (Appellant) (Respondent) Present for: Assessee by : Shri Rajesh Athavle, Ld. C.A. Revenue by : Shri Saurabh Raskar, Ld. Sr. D.R. Date of Hearing : 04.05.2026 Date of Pronouncement : 15.05.2026 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 19.01.2026, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2016-17.

2.

In the instant case, the case of the Assessee was selected for complete scrutiny under CASS for examination of:

(i) Claim of large exempt income; (ii) Large deduction claimed under Section 54B, 54C, 54D, 54G and 54GA.

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3.

Consequently, the Assessing Officer (in short ‘AO’) issued a notice dated 22.06.2018 along with questionnaire to the Assessee, who in response submitted the details called for.

4.

On perusing the details filed by the Assessee, the AO observed that the Assessee is a member of Middle Income Group Co-operative Housing Society, who was the owner of the property and has entered into an agreement for development of the property and to achieve this, the society and its members have awarded a contract to M/s. D.B. MIG Realators and Builders Pvt. Ltd. (in short ‘Developer’) vide Agreement dated 31.10.2020.

5.

Based on the above agreement, the Developer paid the compensation of Rs.3368788/- to the Assessee being consideration for surrender of flat and therefore, the Assessee was show caused vide letter dated 18.12.2018 as to why such amount received from the Developer in lieu of the provisions of re-development agreement, should not be assessed as income from other sources within the meaning of Section 56 of the Act.

6.

The Assessee vide reply dated 20.12.2018 claimed before the AO that such amount of Rs.3368788/- has been received from the Developer as a ‘hardship compensation’ and therefore, the same was Capital Receipt in nature being not taxable.

7.

The AO not being satisfied with the claim of the Assessee, considered such amount received as ‘revenue in nature’ in the form of dividend under the head ‘income from other sources’. The AO also did not allow any expenditure by holding that as the Assessee

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has not furnished any details and documentary evidence for having incurred such expenditure to earn the said dividend income therefore, no expenditure can be allowed.

8.

The Assessee, being aggrieved though preferred first appeal before the ld. Commissioner challenging the order of the AO making the addition of Rs.33,68,788/- being “revenue receipt”, on the grounds inter-alia that the same was ‘capital receipt’ but not the ‘revenue receipt’ as held by the AO and therefore, the amount received by the Assessee from the Developer being exempt not taxable and thus not liable to be considered as ‘revenue receipt’ under the head 'income from other sources’.

9.

The Ld. Commissioner though considered the said claim of the assessee, but not being convinced with same, ultimately affirmed the said addition.

10.

Thus, the Assessee being aggrieved, has preferred the instant appeal.

11.

Heard the parties and perused the material available on record. Admittedly, the Hon’ble Co-ordinate Bench of the Tribunal in the case of Abhay Shaligram Patil v. ITO (ITA No. 4760/M/2023) decided on 30.05.2024, has also considered the identical addition on account of compensation received from M/s. DB MIG Realtors and Builders Pvt. Ltd. and allowed in favour of the Assessee by treating the hardship compensation received by the then Assessee, as ‘capital receipt’ and non-taxable, by observing and holding as under:

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“In the instant case, on information to the effect that the assessee being a Member of MIG Cooperative Housing Society during assessment year under consideration, has received compensation of Rs. 27,73,108/- from M/s. DB MIG Realtors and Builders Private Limited, the case of the assessee was reopened under section 147 of the I.T. Act and consequently notice under section 148 dated 21.3.2018 was issued to the assessee. In response to the same, the assessee filed its return of income on 23.6.2018 declaring total income of Rs. 1,98,510/-. The Assessing Officer perusing the financial of the assessee observed that the assessee is a member of the Middle-Income Group Cooperative Housing Society, who is the owner of the property and entered into an agreement dated 31.10.2010 for development of the property. To achieve this, society and its members executed a contract with M/s. DB MIG Realtors and Builders Pvt. Limited. As per terms of the said agreement, the developer has agreed to develop the property in such a manner that each member of the society could receive a new flat in exchange of surrender of old flat depending upon the size of the old flat along with interest in the additional FSI allotted by MHADA. The developer as per the agreement, has paid to the society being lawful owner of the property and the members, an aggregate monitory consideration of Rs.1,49,89,52,000/- which was further distributed among the members of the society being shareholders, depending upon the size of their old flat. The assessee being a member of the said society by virtue of being shareholder, has also received an amount of Rs. 27,73,108/- being consideration for surrender of his old flat. The Assessing Officer ultimately treated the said receipt of Rs. 27,73,108/- 56 of the Act as revenue receipt in the form of dividend under the head income from other sources being taxable and un-exempted and consequently added the same in the income of the Assessee. The Assessing Officer also not allowed any expenditure to be deducted against said receipt/income, on failure by the assessee to furnish any details and documentary evidence, for having incurred any expenditure to earn said dividend income. 2. The assessee being aggrieved challenged the said addition before the learned Commissioner of Income Tax (in short "Id. Commissioner"). Before the Id. Commissioner, the assessee has claimed that receipt of Rs. 27,73,108/- in fact

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is a capital receipt and having cost of acquisition and therefore not taxable and is exempted and therefore not liable to be considered as "revenue" receipt in the form of dividend under the head 'income from other sources. 2.1 The Ld. Commissioner though considered the said claim of the assessee, but not being convinced, affirmed the said addition by mainly holding that since no transfer of the property took place and the assessee had received compensation in lieu of surrendering of the flat to the developer for re-development, therefore the Assessing Officer has correctly added the amount of Rs.27,73,108/- under the head 'income from other sources' under section 56 of the Act. 3. Being aggrieved, the assessee is in appeal before us. Learned counsel Shri Yogesh Thar along with Shri Deep Chauhan at the outset drew our attention to page No. 140 of the paper book and submitted that in an identical situation, in the case of similarly placed member of the society namely Pramila Roongta and other members of the society who also received similar compensation/receipt as involved in the instant case, the objections dated 30.7.2018 were filed against the initiation of the proceedings under section 147/148 of the Act, which were disposed of by the Assessing Officer by rejecting the same. 4. Against the dismissal of the Objections, Pramila Roongta and others have filed writ petition bearing No. 2762/2018 with Hon'ble Bombay High Court. The Hon'ble Bombay High Court vide its order dated 16.2.2024 quashed the order rejecting the objections by the Assessing Officer and remanded the matter to the Assessing Officer for passing fresh order on the objections filed by the allottees/residents of the society in view of the judgements passed by Hon'ble Coordinate Benches of the Tribunal at Mumbai and Indore respectively in the case of Smt. Delia Raj Mansul Vs. ITO- 35(10)(3), Mumbai and Shri Lawrence Rebello Vs. ITO-1(3), Indore, wherein it was held that the amount which has escaped assessment as alleged in the reasons to believe, is not taxable. 5. In compliance to the directions of Hon'ble High Court, the Assessing Officer i.e. ITO-23, Mumbai vide order dated 29.4.2024 disposed of the objections and accepted the

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contentions of the assessee raised therein and dropped the proposed addition/disallowance by following the decisions of Hon'ble Coordinate Benches of the Tribunal to the effect "that the receipt of the hardship compensation is held as capital receipt and not taxable". The Assessing Officer in Pramil Roongta's case also observed that though the aforesaid decision of the Tribunal has not accepted by the Department but further appeal under section 260A of the Act has also not been filed, as tax effect was below the monetary limit. The Assessing Officer in effect ultimately accepted the claim of the then assessees, qua receipt/compensation identical to the compensation/receipt as involved in the instant case, as capital receipt and not taxable. 6. Learned DR did not refute the aforesaid claim/submission made by the Advocate of the assessee. Hence, considering the peculiar facts and circumstances, as in identical situation and/or circumstances and/or issue as involved in the instant case, the revenue department has accepted the claim of the other members of the society and consequently made no addition qua receipt/compensation and the treated the same as capital receipt not taxable, therefore we are inclined to delete the addition under consideration. Consequently, the addition is deleted.

7.

In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 30- May, 2024.”

12.

As the facts of this case are not deviated, as involved in aforesaid judgment, therefore, respectfully following the same, the Assessee’s claim is allowed by deleting the addition made by the AO as affirmed by the Ld. Commissioner.

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13.

In the result, Assessee’s appeal is allowed.

Order pronounced in the open court on 15.05.2026.

Sd/- Sd/- (JAGADISH) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER

(Tarun Kushwaha) Sr. Private Secretary.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.

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