Haresh Damji Shah v. ITO

Case snapshot

Sections / provisions: 45; 54F; 56(2)(x)

Questions before the Court / Tribunal

• Redevelopment of tenancy rights and capital receipts: The reported order treats surrender/redevelopment of tenancy rights as a capital transaction and considers section 54F along with hardship and redevelopment-related receipts. Multiple receipt categories should be separately explained from the official order.

Material facts and background

2. Brief facts of the case are that case of the assessee was selected for scrutiny under compulsory category based on information received from Sub-Registrar; Mumbai that assessee had purchased an immovable property, and has shown less consideration than the value adopted by stamp value authority. During the assessment the assessing officer issued show caused notice dated 21.01.2021 to explain the facts. In response to such notice the assessee filed his reply on 03.02.2021. In the reply the assessee explained that he was a tenant of the premises of Room No.4, admeasuring 803.42 square feet on the 1st floor of Mahalaxmi Building No.1, Hindu Colony, Dadar (E), Mumbai-14. The tenanted building was owned by Kanchan Nishant Joshi, Aditya Avinash Virkar and Rajshree Avinash Virkar. The landlords/owners have given development rights to redevelopment of property to Sugee Four Developers. The assessee along with landlord and owners entered into an agreement with Sugee Four Developers. As per term of agreement that assessee in lieu of surrender of tenancy right was allotted permanent alternate accommodation on ownership basis, without payment of any consideration, copy of such agreement was...

Haresh Damji Shah as per term of registered agreement, the assessee relinquished various rights in the existing property aggregating of Rs. 1.82 Crore. The details of the value of such rights are mentioned on page No. 4 of assessment order. The assessing officer issued show caused notice as to why provision of section 56(2)(X) may not invoked against the assessee. The assessing officer recorded

response was made to such show caused notice. The assessing officer thereby added Rs. 1.82 crore to the income of assessee. 3. Aggrieved by the action of assessing officer the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written submissions. Submissions of assessee are recorded in para No. 5 impugned order of ld CIT(A). The assessee in his submission stated that he along with his wife was tenant since 1993. The assessee jointly occupying the space under tendency in Mahalaxmi Building in Mumbai and paying monthly rent. Such tenancy was protected under Bombay Rent Control Act. The landlord granted redevelopment right to Sugee Four Developers who entered into a registered agreement dated 04.11.2017 with assessee and his wife and landlord. In pursuance of term of contract the assessee vacated tenanted premises. The assessee was allotted permanent alternate accommodation as flat No. 401, admeasuring 1119.67 square feet. The benefit/consideration/allotment of flat was made in-lieu of tenancy right which is a ‘capital receipt’ and should be tax at capital gain and its investment is exempted under section 54F. Further the hardship compensation...

Appellant / assessee submissions

2. Brief facts of the case are that case of the assessee was selected for scrutiny under compulsory category based on information received from Sub-Registrar; Mumbai that assessee had purchased an immovable property, and has shown less consideration than the value adopted by stamp value authority. During the assessment the assessing officer issued show caused notice dated 21.01.2021 to explain the facts. In response to such notice the assessee filed his reply on 03.02.2021. In the reply the assessee explained that he was a tenant of the premises of Room No.4, admeasuring 803.42 square feet on the 1st floor of Mahalaxmi Building No.1, Hindu Colony, Dadar (E), Mumbai-14. The tenanted building was owned by Kanchan Nishant Joshi, Aditya Avinash Virkar and Rajshree Avinash Virkar. The landlords/owners have given development rights to redevelopment of property to Sugee Four Developers. The assessee along with landlord and owners entered into an agreement with Sugee Four Developers. As per term of agreement that assessee in lieu of surrender of tenancy right was allotted permanent alternate accommodation on ownership basis, without payment of any consideration, copy of such agreement was...

Haresh Damji Shah month. The assessee was also given shifting charges of Rs. 20,000/-, transit rent of Rs. 42,59,174/-. Further Bombay High Court in its decision held that no stamp duty value is leviable on permanent alternate accommodation agreement. 4. The ld. CIT(A) after considering the submission of assessee upheld the action of assessing officer. The Ld. CIT(A) was of the view that the assessee has received property without consideration or inadequate consideration in excess of Rs. 50,000/-. Assessee received flat value of which Rs. 1.10 crore, Car parking 73150, and stamp duty fees of Rs. 5,80,511/-. Thus, such aggregate amount of Rs. 1.23 Crore was upheld with the aforesaid observation. For hardship compensation of Rs. 15,87,555/- and transit rent of Rs. 42,59,174/-, the ld CIT(A) held that such claim is based on self declaration. The claim of brokerage expenditure is not supported by any documentary evidence. Thus, all the additions were upheld. Further aggrieved the assessee has filed present appeal before the Tribunal. 5. We have heard the submission of both the parties and have gone through the orders of lower authorities carefully. The Learned Authorized...

Revenue / respondent submissions

Haresh Damji Shah 6. So far as addition on account of car parking of Rs. 7,31,501/- representing the stamp duty value of car parking is concerned, it was agreed for allotment as per clause 10 of agreement. No such payment was received by the assessee. The possession of said car parking has not been received in the relevant financial year and he received only on 30.09.2021. The said car parking is an open space and no right of ownership or tenancy is created in favour of the assessee. The assessee has no transferable right. More over car parking was allotted along with residential premises. The assessee has not paid any additional amount; it was given along with the flat. To support his submission the Ld.AR relied upon the decision of Mumbai tribunal in case of Dr. Jayesh K. Shah, ITA No. 6743/Mum/2017, 175 ITD 751 (Mum.). On other receipt which include hardship compensation, brokerage charges, shifting charges, transit rent and stamp duty, Ld. AR of the assessee submits that all charges were paid by builder with no such amount was received during the year under consideration. The stamp duty was paid by developer; transit rent was paid on three years and was paid to the landlord....

Court / Tribunal analysis and reasoning

2. Brief facts of the case are that case of the assessee was selected for scrutiny under compulsory category based on information received from Sub-Registrar; Mumbai that assessee had purchased an immovable property, and has shown less consideration than the value adopted by stamp value authority. During the assessment the assessing officer issued show caused notice dated 21.01.2021 to explain the facts. In response to such notice the assessee filed his reply on 03.02.2021. In the reply the assessee explained that he was a tenant of the premises of Room No.4, admeasuring 803.42 square feet on the 1st floor of Mahalaxmi Building No.1, Hindu Colony, Dadar (E), Mumbai-14. The tenanted building was owned by Kanchan Nishant Joshi, Aditya Avinash Virkar and Rajshree Avinash Virkar. The landlords/owners have given development rights to redevelopment of property to Sugee Four Developers. The assessee along with landlord and owners entered into an agreement with Sugee Four Developers. As per term of agreement that assessee in lieu of surrender of tenancy right was allotted permanent alternate accommodation on ownership basis, without payment of any consideration, copy of such agreement was...

Haresh Damji Shah month. The assessee was also given shifting charges of Rs. 20,000/-, transit rent of Rs. 42,59,174/-. Further Bombay High Court in its decision held that no stamp duty value is leviable on permanent alternate accommodation agreement. 4. The ld. CIT(A) after considering the submission of assessee upheld the action of assessing officer. The Ld. CIT(A) was of the view that the assessee has received property without consideration or inadequate consideration in excess of Rs. 50,000/-. Assessee received flat value of which Rs. 1.10 crore, Car parking 73150, and stamp duty fees of Rs. 5,80,511/-. Thus, such aggregate amount of Rs. 1.23 Crore was upheld with the aforesaid observation. For hardship compensation of Rs. 15,87,555/- and transit rent of Rs. 42,59,174/-, the ld CIT(A) held that such claim is based on self declaration. The claim of brokerage expenditure is not supported by any documentary evidence. Thus, all the additions were upheld. Further aggrieved the assessee has filed present appeal before the Tribunal. 5. We have heard the submission of both the parties and have gone through the orders of lower authorities carefully. The Learned Authorized...

Haresh Damji Shah All remaining receipt and addition thereof may be reconsidered by assessing officer. 8. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case of Ld.AR of the assessee. We find that there is no dispute on the facts that the assessee was tenant and in lieu of surrender of tenancy right the assessee and his wife were given flat on ownership basis. The ready reckoner value of such flat was of Rs. 1.10 Crore. On perusal of record and the order of lower authority, we find that the assessee is allotted alternative accommodation in a redevelop project being flat No. 401 in the property. From the contents of redevelopment agreement it is clearly discernable that assessee and his wife were tenant in the property and both were allotted alternative/ new flat under a redevelopment project in exchange/lieu of surrender of tenancy. We find that coordinate bench of Mumbai Tribunal in Vasant Nagorao Barabde (Supra) on similar facts and while considering similar ground of appeal held that where tenancy rights were surrender in favour of developer and against such...

Haresh Damji Shah Nagorao Barabde (Supra). Thus, we held that there is no applicability of section 56 in the present case. So far as addition of car parking of Rs. 7,31,501/- is considered, it was allotted along with alternative flat therefore such addition is also deleted. So far as hardship compensation of Rs. 15,87,555/- is concerned such receipt is a capital receipt as has been held in Sarfraz S. Furniturewalla, 467 ITR 230 (Bom). Further stamp duty and registration fee of Rs. 5,80,500/was paid by builder as per term of agreement so such addition is also deleted. 9. So far as shifting charges is concerned same are admittedly revenue expenditure. Similarly transit rent for 33 months was not paid in the year under consideration and was paid for almost three years and cannot be added similarly brokerage of Rs. 1,16,978/- is also revenue expenditure. Resultantly all addition made by the assessing officer are deleted. In the result, the grounds of appeal raised by the assessee are allowed. 10. In the result, the appeal of the assessee is allowed. Order pronounced on 13/10/2025 in open court. Sd/-

Operative decision and relief

Haresh Damji Shah alternative flat also given relocation charges. The detail of such relocation charges is given on page No. 84-87 of paper book. The stamp duty value of car parking and stamp duty registration for development agreement was paid by developer. The assessee and his wife were regularly making payment of rent in alternative transit accommodation and details of the rent receipt are given on page No. 38-41 of paper book. The tenancy right is ‘capital assets’ which are held as a long term capital assets and there was no cost of acquisition and entire amount received were invested in a permanent alternate accommodation which can be considered as investment for exemption under section 54F. There is no application of section 56(2)(x). The assessing officer disregarded and added Rs. 1.82 crore to the income of the assessee. Though, the tenancy right and the newly alternate accommodation are in joint name, still the assessing officer without appreciation made addition at the hand of assessee. Hardship compensation is also a capital receipt. The lower authorities disregard and ignore the details furnished during the assessment as well as in first appeal. The Ld.AR of the...

Vasant Nagorao Barabde Vs DCIT (2015) 174 taxmann.com 101 (Mum.), Jatinder Kumar Madan Vs ITO (2019) 21 taxmann.com 316(Mum), ACIT Vs Dr. Jayesh K. Shah, 175 ITD 751 (Mum.), Meher F. Surti, ITA No. 1186/Mum/2013 and ITO Vs Abbas Ali Shiraz, (2006) 5 ITD 422(Bang.). 6

Authorities and precedents appearing in the judgment

• No reliable precedent list was extracted automatically; use the full judgment for the citation chain.

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Redevelopment of tenancy rights and capital receipts. The operative result is classified as Remanded / restored. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Redevelopment of tenancy rights and capital receipts. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Maintain a date-and-payment matrix for transfer, agreement, possession, investment and construction; capital-gains exemptions commonly turn on this chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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