The Tax Publishers2020 TaxPub(DT) 1134 (Mum-Trib)

INCOME TAX ACT, 1961

Section 4

Amount received as compensation for unauthorized occupation of premises was in the nature of mesne profit and was, therefore, a capital receipt not chargeable to tax and was thus wrongly characterized by AO as arrears of rent taxable under section 25B read with section 25AA.

Income - Capital or revenue receipt - Compensation received for unauthorized occupation of premises -

Assessee received Rs. 2 crores as compensation for wrongful possession of erstwhile tenant in the property belonging to assessee. AO treated amounts received by assessee as arrears of rent under section 25B and under section 25AA and accordingly, taxed the same under the head 'income from house property' and granted 30% standard deduction thereon under section 24 and assessed remaining Rs. 1,40,00,000 as taxable income from house property. Held: Sum of Rs. 2 crores received as compensation for unauthorized occupation of premises was in the nature of mesne profit and was, therefore, a capital receipt not chargeable to tax.

Followed:Goodwill Theaters (P) Ltd. ITA No. 8185/Mum/2011, dt. 19-6-2013.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 40(a)(ia), Proviso II

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