Builder compensation for alternate accommodation during redevelopment treated as capital receipt, not taxable as income

ITAT Mumbai held that amounts received from the builder as compensation for alternate accommodation during redevelopment are capital receipts. Although the assessee did not utilize the funds for accommodation and stayed with family, the tribunal found the payment represents compensation for hardship arising from vacating the flat and not taxable revenue. The assessing officer's addition treating the receipt as income from other sources was deleted and the assessee's ground was allowed.

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Issues Involved:
1. Condonation of Delay
2. Taxability of Compensation Received for Alternate Accommodation

Condonation of Delay:
The assessee filed an appeal with a delay of 1566 days, which was supported by an affidavit explaining the delay. The affidavit cited reliance on incorrect advice from the previous Chartered Accountant and subsequent realization of the error upon consulting a new CA. The Department objected to the condonation but did not file any counter-affidavit. The Tribunal referred to the precedent set in the case of M/s. Midas Polymer Compounds Pvt. Ltd., v. ACIT, where a delay of 2819 days was condoned based on substantial justice principles. The Tribunal emphasized that substantial justice should be preferred over technical considerations and noted that the delay was not deliberate. Consequently, the Tribunal condoned the delay, allowing the appeal to be heard on its merits.

Taxability of Compensation Received for Alternate Accommodation:
The assessee received Rs. 3,73,191/- from a builder as compensation for alternate accommodation due to redevelopment of his property. The Assessing Officer treated this amount as "income from other sources," rejecting the assessee's claim that it was a capital receipt. The CIT(A) upheld the AO's decision, distinguishing it from the case of Kushal K. Bangia v. ITO, which the assessee had cited.

Upon appeal, the Tribunal considered a similar case, Smt Delilah Raj Mansukhani v. ITO, where compensation for displacement due to redevelopment was deemed a capital receipt. The Tribunal held that such compensation is typically for hardship faced due to displacement and should not be taxed as revenue receipt. Following this precedent, the Tribunal concluded that the compensation received by the assessee was a capital receipt and directed the AO to delete the addition. Thus, the appeal was allowed in favor of the assessee.

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