Tribunal grants exemption on capital gain but upholds tax on compensation.

The Tribunal partially allowed the appeal, granting exemption under section 54 for the capital gain on the surrendered flat. It upheld the taxability of compensation for alternate accommodation as income from other sources.

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Issues:
1. Dispute over addition of long term capital gain on surrender of flat.
2. Dispute over taxability of compensation for alternate accommodation.

Issue 1:
The first issue revolves around the addition of Rs. 43,91,866 as long term capital gain due to the surrender of a flat. The assessee exchanged their old flat for a new one and received cash compensation, which was invested in REC bonds. The Assessing Officer (AO) disallowed the claim under section 54 of the Income Tax Act, stating that the conditions for exemption were not met. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal, after careful consideration, disagreed with the lower authorities. It held that the exchange of flats constituted a transfer and that the new flat's construction within 3 years satisfied the conditions for exemption under section 54. The Tribunal also noted that the cash compensation was part of the consideration for the old flat and thus exempt under section 54. The Tribunal allowed the exemption subject to verification of possession of the new flat within the stipulated time frame.

Issue 2:
The second issue pertains to the taxability of compensation received for alternate accommodation during the construction period. The AO treated this compensation as income from other sources, which was confirmed by the CIT(A). The assessee contended that the compensation was a capital receipt and not taxable. The Tribunal reviewed the case and noted that the compensation was for alternate accommodation and not related to any capital asset. As the actual rent paid was lower than the compensation received, the net amount was rightly taxed as income from other sources. The Tribunal upheld the CIT(A)'s decision in this regard.

In conclusion, the Tribunal partly allowed the assessee's appeal, granting exemption under section 54 for the capital gain on the surrendered flat while upholding the taxability of compensation for alternate accommodation as income from other sources.

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