I-T - Whether when assessee's housing society enters into agreement with property developer, cash compensation received by assessee in addition to larger flat does not fall under any of the Heads of Income in I-T Act, and thus not taxable - YES: ITAT

 THE issue before the Bench is - Whether when assessee's housing society enters into agreement with a property developer, the cash compensation received by assessee in addition to larger flat does not fall under any of the Heads of Income in the I-T Act, and thus not taxable. And the verdict goes in favour the assessee.

Facts of the case

The assessee is an individual member of a housing society - received a sum of Rs.11,75,000 as, ‘cash compensation’. This housing society, along with its members, entered into an agreement with a developer, and, under the said agreement, the developer was to demolish the residential building owned by the housing society, and reconstruct a new multistoried building. Under this arrangement, the assessee, received a slightly larger flat in the new building, which had an additional area of 173 Sq. ft, a displacement compensation of Rs.6,12,000, and an additional compensation of Rs.11,75,000. The AO was of the opinion that the cash compensation of Rs.11,75,000 was required to be treated as ‘casual income’, and, accordingly, taxable in the hands of the assessee. The CIT(A) confirmed the addition.

On appeal, the Tribunal held that,

++ it is only elementary that the connotation of income howsoever wide and exhaustive, takes into account only such capital receipts which are specifically taxable under the provisions of the Act. It is clear that a capital receipt simplicitor cannot be taken as income;

++ that a capital receipt in principle is outside the scope of income chargeable to tax and a receipt cannot be taxed as income unless it is in the nature of revenue receipt or is brought within the ambit of income by way of a specific provision in the Act. No matter how wide be the scope of income u/s 2(24) it cannot obliterate the distinction between capital receipt and revenue receipt;

++ it is not even the case of the AO that the compensation received by the assessee is in the revenue field, and rightly so because the residential flat owned by the assessee in society building is certainly a capital asset in the hands of the assessee and compensation is referable to the same. The receipt of Rs.11,75,000 by the assessee cannot be said to be of revenue nature, and, accordingly, the same is outside the ambit of income u/s 2(24) of the Act.