Rehabilitation Allowance received On Account Of Re-Development Of Society Can't Be Treated As Income: Mumbai ITAT
Referring to the decision of the Bombay High Court in case of Sarfaraz S. Furniturewall [Writ Petion No. 4958 of 2024], the Mumbai ITAT held that rehabilitation allowance paid by the developer to its resident customer who had suffered hardship due to dispossession on account of re-development, cannot be treated as income in hands of recipient. Single Bench of Prashant...
Referring to the decision of the Bombay High Court in case of Sarfaraz S. Furniturewall [Writ Petion No. 4958 of 2024], the Mumbai ITAT held that rehabilitation allowance paid by the developer to its resident customer who had suffered hardship due to dispossession on account of re-development, cannot be treated as income in hands of recipient.
Single Bench of Prashant Maharishi (Accountant Member) observed that “It is undisputed fact that assessee is also receiving the hardship allowance from the developer. Thus, the amount of hardship allowance received by the assessee of Rs. 25,21,508/- is not income of the assessee”. (Para 10)
Facts of the case
An information was received during assessment that assessee being member of MIG Co-op Housing Society Ltd., has received a payment of Rs. 25,21,508/- from D.B. MIG Realtors and Builders when that co-operative society has gone for re-development. Since the assessee did not file its return, the AO issued reopening notice u/s 148 and taxed the hardship allowance received from the builder, as income of assessee.
On appeal, the CIT(A) held that assessee has wrongly claimed that compensation received is a capital receipt.
Observations of the Tribunal
The Bench perused the decision of the Bombay High Court in case of Sarfaraz S. Furniturewall [Writ Petion No. 4958 of 2024], where the identical issue as similar to the case at hand had been discussed.
Hence, referring to said decision of Bombay High Court, the Bench reiterated 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.
Since the assessee is receiving the hardship allowance from the developer, hence the Bench held that said amount of allowance will not be taxed as income of assessee.
Therefore, respectfully following the decision of Bombay High Court, the ITAT allowed Assessee's appeal and direct the AO to delete the addition of Rs. 25,21,508/- made in the hands of assessee.
Counsel for Appellant/ Assessee: V.G. Ginde and Kumar Kale
Counsel for Respondent/ Revenue: R.R. Makwana
Case Title: Sonal Samit Vartak versus ITO
Case Number: ITA No.1139/Mum/2024