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Issues: Whether the addition of hardship compensation of Rs. 33,70,773 received under a redevelopment arrangement was sustainable in the assessment year when the amount had already been offered to tax on a proportionate basis in the relevant later assessment years.
Analysis: The assessee had received hardship compensation and corpus fund under the redevelopment agreement. The corpus fund and the hardship compensation pertaining to the assessment year in question were offered to tax, while the balance hardship compensation was deferred and returned in the subsequent assessment years on a proportionate basis. The legal character of hardship compensation received from a builder in a redevelopment transaction was treated as settled in favour of the assessee as a capital receipt not liable to tax. On the facts, the same amount of Rs. 33,70,773 had already been subjected to tax in the later years, and taxing it again in the impugned year would result in double taxation.
Conclusion: The addition of Rs. 33,70,773 was not sustainable and was deleted; the issue was decided in favour of the assessee.
Final Conclusion: The assessment addition was set aside because the disputed receipt had already been accounted for in the subsequent years and could not be brought to tax again in the impugned year.
Ratio Decidendi: Hardship compensation received under a redevelopment agreement, when already taxed on a proportionate basis in the relevant years, cannot be taxed again in the same amount in the impugned year, as such duplication is impermissible and the receipt is treated as capital in nature.
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