Monica Parmanand Mirchandani v. ITO

Case snapshot

Sections / provisions: 2(24); 4; 56

Questions before the Court / Tribunal

• Redevelopment hardship compensation as capital receipt: The reported Tribunal order treats hardship compensation received by a society member from a developer as a capital receipt rather than income from other sources, following redevelopment-compensation jurisprudence.

Material facts and background

Brief facts of the case are that the assessee is an individual and is a tuition teacher

by profession and had filed her return of income for the year under consideration, declaring total income at Rs.2,77,800/- as ‘income from other sources’. The assessee’s case was reopened vide notice u/s. 148 of the Act dated 29.03.2019 and the assessee had filed her return of income on 16.04.2019, pursuant to the said notice and had declared the same income as that of her returned income. The assessee was issued and served notices u/s. 143(2) and 142(1) of the Act. 4.

The learned Assessing Officer ('ld. A.O.' for short) had passed the assessment

order u/s. 143(3) r.w.s. 147 of the Act on 30.11.2019, determining total income at Rs.74,12,272/-, after making an addition of Rs.71,34,472/- on the amount received from DB MIG Realtors & Builders Pvt. Ltd. as ‘revenue receipt’. 5.

Aggrieved the assessee was in appeal before the first appellate authority who vide

order dated 06.02.2024 upheld the addition made by the ld. A.O. on the ground that the assessee has failed to prove the source of the said receipt. 6.

The assessee is in appeal before us, challenging the order of the ld. CIT(A).

Appellant / assessee submissions

The learned Authorised Representative (ld. AR for short) for the assessee

developer after duly vacating the existing members who were to hand over the vacant position to the developer for reconstruction of the housing society. The ld. AR further stated that as per the said agreement, hardship compensation was to be paid by the developers to all the residents of the society where the assessee also received the first installment during A.Y. 2012-13 and due to the delay in commencement of the project, there was modification of the said agreement. The ld. AR further contended that as per the modified terms and condition, the balance hardship compensation was to be received by the members of the society in seven installments. The ld. AR iterated that the ld. A.O. treated the hardship compensation received by the assessee as ‘income from other sources’ and made the impugned addition. The ld. AR placed reliance on the following decisions where some of which are in the case of the fellow resident of the same society, in whose case the Tribunal held in favour of the assessee : • Sarfaraz S Furniturewalla vs. Afshan Sharfalu Ashok Kumar & Others (in W.P. No. 4958 of 2024 vide order dated 15.04.2024), • The Ajay Parasmal Kothari (in ITA No. 2823/Mum/2022 reported...

record. The only moot question to be adjudicated in the present appeal is whether the amount received by the assessee from the developer is in the nature of hardship compensation and if so whether the same is ‘capital receipt’ or ‘revenue receipt’. For this purpose, the ld. AR had brought our attention to the Development Agreement entered into by the builder and the assessee, which is enclosed in the paper book from pages 1 to 75 where at pg. no. 67 of the said agreement is Annexure ‘J’ which enumerates the mode and payment at which the hardship compensation shall be paid by the developer to the residents and further the deed of modification relied upon by the ld. AR is enclosed at pg. nos. 76 to 105 where at pg. no. 99 and pg. no. 102 contains the details of the said payments. On perusal of the same, it is observed that the developer is under the obligation to pay the hardship compensation in installments at various stages, commencing from execution of the MOU, handing over of vacant and peaceful possession and commencement of construction. The ld. A.O. has only disputed the nature of receipt as ‘revenue receipt’ and has not brought anything on record to show that the amount...

Revenue / respondent submissions

The learned Departmental Representative (ld. DR for short), on the other hand,

controverted the said fact that the hardship compensation should have been received by the assessee as onetime payment, whereas in the present case in hand, the assessee has received the hardship compensation in three years ranging from A.Ys. 2012-13, 2015-16 & 2016-17. The ld. DR further contended that the said receipt is the revenue receipt and relied on the order of the lower authorities. 9.

Court / Tribunal analysis and reasoning

record. The only moot question to be adjudicated in the present appeal is whether the amount received by the assessee from the developer is in the nature of hardship compensation and if so whether the same is ‘capital receipt’ or ‘revenue receipt’. For this purpose, the ld. AR had brought our attention to the Development Agreement entered into by the builder and the assessee, which is enclosed in the paper book from pages 1 to 75 where at pg. no. 67 of the said agreement is Annexure ‘J’ which enumerates the mode and payment at which the hardship compensation shall be paid by the developer to the residents and further the deed of modification relied upon by the ld. AR is enclosed at pg. nos. 76 to 105 where at pg. no. 99 and pg. no. 102 contains the details of the said payments. On perusal of the same, it is observed that the developer is under the obligation to pay the hardship compensation in installments at various stages, commencing from execution of the MOU, handing over of vacant and peaceful possession and commencement of construction. The ld. A.O. has only disputed the nature of receipt as ‘revenue receipt’ and has not brought anything on record to show that the amount...

Operative decision and relief

amount from its builder, the same will not come under the purview of the income of the assessee within the meaning of section 2(24) of the I. T. Act unless it is a revenue receipt. As it is the settled proposition of law that the hardship compensation is a ‘capital receipt’, we deem it fit to direct the ld. A.O. to delete the addition made in the hands of the assessee in respect of the same. In view of the same, the grounds of appeal raised by the assessee is allowed. ITA No. 1081/Mum/2024 (Assessment Year: 2016-17) ITA No. 1083/Mum/2024 (Assessment Year: 2012-13) 11.

In the result, all the appeals filed by the assessee are allowed. Order pronounced in the open court on 23.09.2024.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

Authorities and precedents appearing in the judgment

• Monica Parmanand Mirchandani vs. ITO
• Sarfaraz S Furniturewalla vs. Afshan Sharfalu Ashok Kumar & Others (in W.P
• Smt. Delilah Raj Mansukhani vs. ITO (in ITA No. 3526//Mum/2017 vide order
• Rajesh Jayvant Somnay vs. ITO (in ITA Nos. 533 & 534/Mum/2023 vide order
• Abhay Shaligram Patil vs. ITO (in ITA No. 4760/Mum/2023 vide order dated
• Vinod Murlidhar Chawal vs. ITO (in ITA No. 3206/Mum/2022 vide order dated
• Lawrence Rebllow vs. ITO (in ITA No. 132/Ind/2020 vide order dated 22.09.2021)
• Court in the case of Sarfaraz S Furniturewalla vs. Afshan Sharfalu Ashok Kumar &

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 hardship compensation as capital receipt. The operative result is classified as All assessee appeals allowed. 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 hardship compensation as capital receipt. 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

• Use the judgment as a fact-specific precedent: match the statutory version, assessment period, procedural stage and evidentiary record before relying on the result.
• Check whether a later High Court/Supreme Court order has affirmed, reversed, distinguished or rendered the decision academic.
• 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

Read / download the clean local judgment copy

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