Question And Answer
Subject: Whether compensation received for releasing the rented property is liable to tax ?
Querist: Paarth Garg
Answered by:
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Date: May 15, 2021
Query asked by Paarth Garg


We are one of the many tenants of public trust for more than 40 years. The trust tried to evict us earlier through the Court and the matter went up to Supreme Court where the decision was in our favor. Now the trust has proposed to pay us compensation through a compromise petition before the Small Causes Court. Will this compensation be taxable under Income Tax or Capital Gain or will be exempt as casual income?

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Answer given by

Surrender of tenancy will be taxable as Capital Gains u/s 45 and not as Income from Other sources. Kindly refer Amol C. Shah (HUF) vs. Income Tax Officer [2020] 120 263 (Bom) (HC)

The recipients can claim the benefit under section 54F (Investment in residential house) subject to other conditions or any specified securities if available for claiming exemption in respect of capital gains . One may also has to read the terms in the compromise petition .
Dr. K .Shivaram Senior Advocate

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