INCOME TAX ACT, 1961

--Income --Capital or revenue receiptCash compensation--Assessee was a member of a housing society. The society, along with its members, entered into an agreement with a developer to demolish the residential building owned by the society and reconstruct a new multistoried building. Under this arrangement, the assessee, as a member of society received a slightly larger flat in the new building, a displacement compensation and an additional compensation. AO was of the opinion that the cash compensation was required to be treated as casual income, and, accordingly, taxable in the hands of the assessee. Assessee contended that as the cash compensation was in nature of capital receipt, same should not be treated as income. Revenue argued that cash compensation received by the assessee was nothing but his share in profits earned by the developer which were essentially revenue items in nature. Held: The compensation received by the assessee was not in the revenue field because the residential flat owned by the assessee in society building was certainly a capital asset in the hands of the assessee and compensation was referable to the same. Further, in order to find out whether the receipt is a capital receipt or revenue receipt, one has to see what it is in the hands of the receiver and not what it is in the hands of the payer'. Therefore, the consideration for which the amount had been paid by the developer was not really relevant in determining the nature of receipt in the hands of the assessee. In view of these discussion, cash compensation by the assessee could not be said to be of revenue nature, and, accordingly, the same was outside the ambit of income under section 2(24).

Income Tax Act, 1961 Section 2(24)

IN THE ITAT MUMBAI BENCH A

B.R. MITTAL, J.M. & PRAMOD KUMAR, A.M.