Redevelopment hardship compensation treated as capital receipt, not taxable as income from other sources.

Monetary compensation received under a housing society redevelopment agreement for displacement, relocation hardship and rehabilitation was treated as a capital receipt rather than income from other sources. The Tribunal applied its earlier coordinate bench rulings on identical redevelopment facts, holding that such payments compensate the loss and inconvenience arising from surrendering possession and shifting, and are not revenue in character. On that basis, the receipt was held not taxable under the head income from other sources, and the related addition was directed to be deleted.

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Issues: Whether hardship compensation or displacement compensation received on redevelopment of a housing society is taxable as income from other sources or is a capital receipt not liable to tax.

Analysis: The assessee received monetary compensation from the developer pursuant to a redevelopment agreement, stated to be paid for displacement from the existing flat and the attendant hardship of relocation. The receipt was claimed as a capital receipt, while the tax authorities treated it as taxable income from other sources. The Tribunal followed its earlier coordinate bench decisions on identical facts, where compensation paid for hardship, rehabilitation, shifting, or displacement on redevelopment of property was held to be capital in nature. On that basis, the receipt was not regarded as revenue income chargeable under the head income from other sources.

Conclusion: The hardship compensation was held to be a capital receipt and the addition was directed to be deleted.

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