The Income Tax Appellate Tribunal, Mumbai, ruled that the amount of hardship allowance received by the assessee is not income of the assessee.
The bench relied on the judgment of Bombay High Court in case of Sarfaraz S. Furniturewalla in which it has been held that the hardship allowance paid by the developer is not to be considered and is not liable to be taxed as revenue receipt.
Facts
The only grievance in the appeal is regarding addition of Rs. 25,21,508/- made by the AO being hardship compensation received from builder for vacating the existing flat for re-development purposes taxed as income from other sources.
The claim of the assessee is that such receipt is a capital receipt and not income.
The assessee has not filed any return of income for the assessment order. The information was received that assessee being member of MIG Co-op Housing Society Ltd., has received a payment of Rs. 25,21,508/- during the F.Y. 2010-11 from D.B. MIG Realtors and Builders when that co-operative society has gone for re-development.
Notice u/s 148 was issued to the assessee. Assessee submitted that the above sum is hardship allowance received from the builder.
She also submitted the development agreement between the co-operative housing society and the builder. The AO questioned the same as according to him the above amount is not exempt. Assessee submitted that is a capital receipt and relied upon several judicial precedents.The AO rejected the same and made the addition of the amount.
Conclusion
The tribunal observed that Bombay High Court in Writ Petion No. 4958 of 2024 in case of Sarfaraz S. Furniturewall in which the High Court has held that any hardship allowance and rehabilitation allowance which is paid by the developer who suffers hardship due to dispossession cannot be considered as revenue receipt and same is not liable to be taxed.
The bench further observed that it is undisputed fact that the assessee is also receiving the hardship allowance from the developer. Thus, the amount of hardship allowance received by the assessee is not income of the assessee.
Therefore, respectfully following the decision of Bombay High Court, the tribunal allowed the ground of the appeal and directed the Assessing Officer to delete the addition of Rs. 25,21,508/- made in the hands of the assessee.
Case Details
Case Name: Sonal Samit Vartak v/s ITO
Citation: ITA No.1139/Mum/2024
Tribunal: ITAT, Mumbai
Coram: Shri Prashant Maharishi, Accountant Member
Date Of Decision: 16.08.2024
