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2024 (2) TMI 451 - ITAT MUMBAINature of receipt - compensation for displacement in terms of re-development agreement as “Hardship Compensation”- surrender of flats by members pursuant to the re-development agreement of the society - as per AO action of the housing society handing over payment from builder to the individual member/assessee was not in accordance with the “Principle of Mutuality” since the same was received from the developer (a third party) - Treating the Hardship Compensation Fund as “Dividend Income” received from the residential society - According to the assessee, the amount received was in the nature of capital receipt and not as such taxable in the hands of the assessee it is nothing but rehabilitation allowance and constitutes capital receipt as the property has gone into re-development HELD THAT:- We find that Co-ordinate Bench of this Tribunal in the case of Kushal K. Bangia [2012 (2) TMI 29 - ITAT MUMBAI] have answered the question in favour of the assessee by holding it to be capital receipt not liable to tax. “Hardship Compensation” given to the assessee pursuant to the re-development agreement is a capital receipt and cannot be treated as revenue receipt as held by the AO/Ld. CIT(A). The reliance placed by AO/Ld. CIT(A) on the case law of the Hon’ble Supreme Court in the case of M/s. Bangalore Club v CIT [2006 (7) TMI 146 - KARNATAKA HIGH COURT] is not relevant on the issue in hand. Therefore, the AO/Ld. CIT(A) erred in law holding that hardship compensation received by the assessee from the builder was in nature of the dividend in the hands of the assessee/member of the housing society - 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 when occasion arises for computing capital gains in respect of the said asset. Appeal of assessee is allowed.
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