The assessee, Haresh Damji Shah, was a joint tenant along with his wife in a residential premises in Dadar, Mumbai. The property underwent redevelopment, and under a Permanent Alternate Accommodation Agreement (PAAA), the assessee surrendered his tenancy rights in exchange for a new residential flat, car parking, hardship compensation, transit rent, shifting charges, brokerage and stamp-duty payments made by the developer. The Assessing Officer invoked section 56(2)(x) and made an addition of ₹1.82 crore by treating the benefits received as “income from other sources.” The CIT(A) upheld most of these additions. On appeal, the ITAT held that tenancy rights are capital assets, and surrender of such rights in exchange for a flat constitutes a capital transaction. Therefore, section 56(2)(x) cannot be applied. The Tribunal accepted that the consideration received resulted in capital gains, which were eligible for exemption under section 54F since the entire amount stood invested in the new flat. It further held that hardship compensation is a capital receipt, the stamp duty and registration charges were paid by the developer and cannot be taxed, and transit rent, brokerage and shifting charges are revenue items and not income. The ITAT also noted that the tenancy and the alternate accommodation were jointly held with the assessee’s wife, making taxation of the entire amount in the assessee’s hands incorrect. Consequently, all additions were deleted and the assessee’s appeal was allowed