New Delhi, Oct. 13 -- The redevelopment of a housing society can bring flat owners a new home, additional carpet area and lump-sum compensation from a builder. But the tax treatment of these benefits can become a source of dispute, particularly when the income-tax department treats money received for vacating an old flat as capital gains.

In a ruling dated 25 March 2026, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that Rs.82 lakh received by a Mumbai flat owner as compensation under a redevelopment agreement was not taxable as income in the circumstances of the case.

The tribunal also set aside a separate direction to tax the additional carpet area received in the redeveloped flat, asking the tax authorities to rec...