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Facts
The assessee received 'Hardship Compensation' and 'Corpus Fund' from a redevelopment agreement. While a portion was offered to tax in AY 2016-17, a balance of Rs. 33,70,773/- was deferred and offered in subsequent years (AYs 2017-18 to 2019-20) on a proportionate basis. The Assessing Officer (AO) added back this amount in AY 2016-17, leading to an appeal.
Held
The Tribunal held that 'Hardship Compensation' received under such agreements is generally considered a capital receipt and not taxable. Although the assessee had offered it to tax as revenue, the AO's addition of Rs. 33,70,773/- was deemed unjustified and amounted to double taxation.
Key Issues
Whether 'Hardship Compensation' received by a society member from a builder under a redevelopment agreement is a capital or revenue receipt, and whether deferring and taxing it in subsequent years is permissible.
Sections Cited
147, 144(B), 148, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Ashok Ramchandra Naik vs ITO, Ward 23(1)(1), Mumbai B8, 58 MIG Colony, Gandhi Piramal Chambers, Mumbai- Nagar, Bandra, Mumbai- 400012 400051 PAN:AACPN1184A APPELLANT RESPONDENT Assessee by : Shri Jitendra Singh Respondent by : Shri Surendra Mohan (Sr. DR) Date of hearing : 07/04/2026 Date of pronouncement : 10/04/2026 O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2016-17, date of order 11.09.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity the ‘Ld. AO’) order passed under section 147r.w.s. 144(B) of the Act date of order 26.03.2023.
Ashok Ramchandra Naik 2. The brief facts of the case are that the assessee is an individual and filed his return by declaring income from house property, income from profession and income from other sources. The assessee filed the return by declaring total income Rs.25,07,010/-. The Ld. AO issued the notice u/sec. 148 of the Act for reopening of assessment. The assessee thereafter had filed a return of income in response to the notice u/sec.
During the assessment proceeding the Ld. AO found that the assessee is a member of the MIG CHS Group I Society (in short ‘Society’). The society had signed a redevelopment agreement with M/s. D.B. MIG Realtors and Builders Pvt. Ltd. on 31.10.2010. Thereafter, both the parties entered in modification agreement dated 23.08.2014 in between the Society and M/s. MIG (Bandra) Retailers and Builders Pvt. Ltd. in the Article 3, Clause (d), in page no-7of the agreement (enclosed in APB page no.23 ) it is specified that the each Members of the society is entitled to “Hardship Compensation” at the rate of 170/- per month of the total area from the date of handing over till the possession. Copy of the said modification agreement is duly annexed in APB page nos. 13 to 57. During the course of assessment the Ld. AO found that the assessee had received total amount to Rs.1,06,51,198/- as “Hardship Compensation” & “Corpus Fund”. During the assessment the assessee had filed the letter dated 11.01.2023 by addressing to the Ld. AO had made the details of amount received related to “Hardship Compensation” & “Corpus Fund” which is as follows: Remarks For the Amount (in Tax Period Rs.) Treatment 11,50,050.00 Hardship (i) From Compensation received at the rate Offered Rs.170/- per sq. ft. on 615 sq. ft. for 11 months 01/05/2015 for to Taxation 31/03/2016 in AY2016- 17 Ashok Ramchandra Naik 12,54,600.00 Hardship (ii) From Compensation received at the rate Offered Rs.170/- per sq. ft. on 615 sq. ft. for 12 months 01/04/2016 for to Taxation 31/03/2017 in AY2017-18 12,54,600.00 Hardship iii) From Compensation received at the rate Offered Rs.170/- per sq. ft. on 615 sq. ft. for 12 months 01/04/2017 for to Taxation 31/03/2018 in AY2017-18 8,61,573.00 (iv) From Hardship Compensation received at the rate Offered Rs.170/- per sq. ft. on 615 sq. ft. for 8 months and 7 days 01/04/2018 for to Taxation 07/12/2018 in AY2019- 20 Total 45,20,823.00
61,30,375.00 Corpus Offered Fund for Taxation in AY2016- 17
It is observed that during the course of assessment proceedings, the assessee received an amount of Rs. 11,50,050/- for A.Y. 2016–17 and a corpus fund of Rs. 61,30,375/-, both of which were duly offered to tax. With regard to the balance amount of “Hardship Compensation” of Rs. 33,70,773/-, the same was received in advance during F.Y. 2015–16 relevant to A.Y. 2016–17. However, the said amount was deferred over the period from 01.04.2016 to 07.12.2018 and offered to tax in the respective years on a proportionate basis. The year-wise details of such deferred income are as follows:–
The assessee during the reassessment submitted that all three incomes were deferred for AYs. 2017-18 to 2019-20 & offered to tax in the respective years on a proportionate basis but the Ld. AO had added back of Rs.33,70,773/- in impugned assessment year is unjustified. The assessee contended that there is a double taxation related to the same income amount to Rs.33,70,773/-. The aggrieved assessee filed an appeal before the Ld. CIT(A). The CIT(A) upheld the impugned assessment order. Being aggrieved assessee filed an appeal before us.
The Ld. AR argued filed a paper book comprising page 1 to 91 which has been placed on record. The Ld. AR contend that related to “Hardship Compensation” for A.Ys. 2017-18 to 2019-20 total amount to Rs.33,70,773/- was offered to tax in the respective years on a proportionate basis. Though he stated that by considering the order of Hon'ble Bombay High Court and the order of Coordinate Bench of ITAT Mumbai, the “Hardship Compensation” is considered as income in nature of capital receipt which is not taxable income. The Ld. AR respectfully relied on the order of the Coordinate Bench of ITAT, Mumbai in the case of Nalini Sanjeev Nadkarni vs ITO in and 1982/Mum/2024 the date of pronouncement 24.07.2024. The relevant paragraph no.9 of the said order is reproduced as below:
Ashok Ramchandra Naik “9. We have considered the facts, circumstances and the ratio of the judicial decisions. The Hon'ble Tribunal has passed the order, where the hardship compensation received by the asssesse is considered as capital receipt and is not taxable. Accordingly, we follow the judicial precedence, and set aside the order of the CIT(A) and direct the Assessing officer to delete the addition. And we allow the grounds of appeal in favour of the asssesse.”
The Ld. DR supported the orders of the revenue authorities. However, the Ld. DR was unable to rebut the submissions of the Ld. AR by placing on record any contrary judicial precedent.
We heard the rival submission and considered the documents available in the record. On perusal of the record we find that the assessee had received the “Hardship Compensation” including the “Corpus Fund” amount to Rs.1,06,51,198/- in the A.Y. 2016-17. The assessee offered the income to tax on proportionate basis. The ‘Corpus’ amount tor Rs.61,30,375/- & the “Hardship Compensation” amount to Rs. 11,50,050/- both were duly offered to tax in A.Y. 2016-17. Related to “Hardship Compensation” for A.Ys. 2017-18 to 2019-20 were offered to tax in the respective assessment year in proportionate basis. We find that the issue related to taxability of the “Hardship Compensation” received by the assessee from builder in terms of redevelopment agreement is no longer res integra. We find that the Coordinate Bench of ITAT Mumbai in case of Nalini Sanjeev Nadkarni (supra) and also in case of Jitendra Kumar Soneja vs ITO reported in (2016) 72 taxmann.com 318 (Mum Trib.) have settled the issue in favor of the assessee by holding it to be capital receipt not liable to be taxed. We find the issue involved in the instant case is also covered by the order of the Coordinate Bench of ITAT. But the assessee had already considered the alleged “Hardship Compensation” as a revenue receipt and offered to tax in respective Ashok Ramchandra Naik years. We find that the assessee had deferred the income in three assessment years & had already offered to tax in respective years related to income of Rs.33,70,773/-. Considering the entire fact the addition amount to Rs. 33,70,773/- was made by the Ld. AO is unjustified as cost by the double taxation. Accordingly, the impugned appellate order passed by the Ld. CIT(A) is set aside. So, the addition made by the Ld. AO amount to Rs.33,70,773/- is deleted.
In the result, the appeal of the assessee bearing