The Mumbai branch of Income Tax Appellate Tribunal (ITAT) bench made it clear that the income through the relinquishment of right over a property can’t be considered as the “capital gain” thus it doesn’t come under income tax regime 
The said order comes in a case where, on a license basis, Smt. Saraswati Vithaldas Sahita occupied a flat on the second floor of the building (Gangasagar). After her death, one of his two sons Vidyut Sahita with his family occupied the flat. The building however was purchased by M/s H.M. Enterprises and to vacate the building they filed suit against the occupier of the building. In this case, the daughter-in-law of Mrs. Saraswati Vithaldas Sahita is the appellant.
An Out of Court settlement was made and the appellant received ₹25,00,000/- for not interfering possessions of M/s H.M. Enterprises. After that, the Assessing Officer (AO) considered the amount as the capital gain and demanded tax on it. The first appellate authority also maintained the same order.
In this appeal, the tribunal observed that in the suit, the defendants at the Court of Small Causes at Mumbai declared that they had not created any right, title, or interest in favor of another person with possession of the suit premises.
The ITAT Mumbai tribunal withdraws all the previous orders in the case that came from lower authorities and said that Income from Relinquishment of Right of a property can’t be considered as the capital gain thus it doesn’t attract Capital Gain Tax 
The ITAT tribunal observed that “the distillation of precedents must now be applied to the facts of the present case. We are of the considered view that the ratio laid down in the decisions mentioned at para 7 & 7.3 hereinabove is applicable to the instant case. Following the same, we set aside the order of the Ld. CIT(A).”
