TaxTMI 
TaxTMI 
2026 (5) TMI 292
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....see as a member of Radha Kunj Cooperative Housing Society Ltd. was owning a flat in the society. On 14.10.2014, the Housing Society entered into a redevelopment with a developer M/s. Aum Developers. As per the terms of the development agreement, the members of the society including the assessee were to vacate their respective flats and hand over possession to the developer for redevelopment purpose. The developer, as per the terms of the agreement, would demolish the existing structure and redevelop the property. In consideration of the development rights granted by the society in favour of the developer, the developer agreed to provide the following: i. Without payment of monetary consideration one residential flat having 56% additional carpet area over and above the existing carpet area of the flat belonging to each member. ii. Parking area commensurate with the area of the flat held by each member of the society. iii. Lump-sum payment to each member of the society calculated at the rate of 5500 per sq. ft. of the existing carpet area of the flats. iv. To enable the members of the society to shift to alternative accommodation, the developer sha....
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....capital assets. She further submitted, the assessee continued to remain as a member of the society, hence remained entitled to receive a redeveloped flat in lieu of the existing flat. She submitted, the land belonged exclusively to the society and not to individual members. Whereas, the society granted the development rights to the developer and not the members. Therefore, the assessee had not transferred any capital asset within the meaning of Section 2(47) of the Act. 6. Proceeding further, she submitted, even assuming that there is a transfer, the cost of acquisition of the capital asset transferred is indeterminate. Therefore, due to failure of computational provisions no capital gain tax can be computed. In this context, she relied upon the decision of the Hon'ble Supreme Court in the case of 'Commissioner Of Income Tax, Bangalore vs B. C. Srinivasa Setty', 128 ITR 294 (SC). In so far as direction of the First Appellate Authority to consider the additional 56% carpet area as sale consideration, learned counsel submitted, since the additional carpet area allotted is part of the redevelopment agreement, it is in the nature of an exchange of residential accommodation. Further,....
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....rovide additional carpet area of 56% over and above the existing carpet area of the flats belonging to each member. Additionally, some monetary compensation would also be paid to each member. Undisputedly, the assessee had received compensation Rs. 82,00,000/- from the developer. In this context, it is necessary to look to some of the terms of the agreement providing for such compensation: "3.5 The Developer shall pay to each of the Members a sum calculated at the rate of Rs. 5,500/- (Rupees Five Thousand Five Hundred only) per square foot of the existing carpet area of the Flats, as per the details set out in Annexure "7" (the "Member's Compensation"). The Member's Compensation shall be deposited by the Developer with Divya Shah Associates, Advocates & Solicitors appointed by the Society ("DSA") 15 days after the Specified Date (as defined below in clause 8.5). DSA shall distribute the Member's Compensation amongst the Members is set out in Annexure "7" at the time of the Society handing over peaceful and vacant possession of the entire Plot with the Existing Building (with the Members having duly vacated their respective Flats) to the Developer for the purpose of....
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....Constructions Private Limited ("Developer"). As per annexure-N of the said Re-development Agreement, forming part of the paper book from pages 10-37, the assessee's name appears at serial no.37 having his old flat "A/63-Flat No. 597" in the said society and is entitled to get a new flat of 1814 sq. ft. in place of his old flat of 907 sq. ft. along with the compensation amounting to total Rs. 80 lakhs in instalments. As per the aforesaid Agreement, the compensation amount shall be handed over by the Developer to the Society for and on behalf of the members and the Society shall give a valid and sufficient discharge with regard to the same to the Developer, and the Society agrees and undertakes to forthwith hand over to the members the respective pay orders, only on such individual members signing and handing over to the Society the consent letter. Out of Rs. 80 lakhs, the assessee received Rs. 16 lakhs in the financial year 2013-14. As per the Revenue, the balance amount of Rs. 64 lakhs was received by the assessee in the year under consideration. Since this amount was not considered as income by the assessee in his return of income by treating the same as capital receipts, reas....
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.... the amount has been paid by the developer are, therefore, not relevant in determining the nature of receipt in the hands of the assessee. In view of these discussion, in my considered view, assessee could not be said to be of revenue nature, and, accordingly, the same is outside the ambit of income under section 2(24) of the Act. The impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same will be taken into account as such, as and when occasion arises for computing capital gains in respect of the said asset. Subject to these observations, the appeal of assessee is allowed." Respectfully following the above observations of the ITAT Mumbai Bench as well as the orders cited supra, we are compelled to hold that the benefit received by the assessee in the form of bigger size of flat and amount received as hardship allowance from the developer is a capital receipt, which cannot be treated as revenue receipt for taxing as income." 9. Since in the present case also the taxability of receipt of similar nature, i.e. hardship allowance is involved, therefore, respectfully following the aforesaid decision the addition of Rs....