Transit Rent Not Taxable, Not Subject to TDS, Rules Bombay HC
Moneylife Digital Team 10 May 2024
Transit rent received from builders during redevelopment projects is not taxable and thus is exempted from tax deduction at source (TDS) obligations, the Bombay High Court (HC) says.
 
In an order last month, the Bombay HC bench of justice Rajesh S Patil says, "The ordinary meaning of rent would be an amount which the tenant or licensee pays to the landlord or licensor. In the present proceedings, the term used is 'transit rent', which is commonly referred as hardship allowance or, rehabilitation allowance or displacement allowance, which is paid by the developer or landlord, the tenant, who suffers hardship due to dispossession hence the 'transit rent' is not to be considered as revenue receipt and is not liable to be tax. As a result there will be no question of deduction of TDS from the amount payable by the developer to the tenant."
 
Sarfaraz S Furniturewalla filed a case against Afshan Sharfali Furniturewalla, Ashok Kumar, and others. During the previous hearing, Sarfaraz Furniturewalla submitted that he is facing financial difficulties as he was the person who handed over the possession of the suit premises to the developer and at an advanced age, he is staying in the rental accommodation where he is paying a monthly compensation of Rs1.20 lakh per month. 
 
The bench then allowed Sarfaraz Furniturewalla to withdraw 50% of the amount deposited by the landlord or developer i.e. Rs1.35 lakh from April 2024. 
 
During the hearing last month, advocate Manal Dhanani, representing the developer, sought directions from the HC to get photocopies of the PAN cards of all parties to deduct TDS from the amount payable to them as 'transit rent'.
 
However, Rustom Pardiwala, counsel for Sarfaraz Furniturewalla, submitted that there is no question of deducting TDS from the transit rent. Referring to two orders issued by the income-tax appellate tribunal (ITAT) (Ms Delilah Raj Mansukhani in ITA No. 3526/MUM/2017 (Assessment Year-AY10-11), and Ajay Parasmal Kothari in ITA No. 2823/MUM/(AY13-14)), he submitted that the issue of TDS on rent has already been covered in those orders.
 
In Ms Mansukhani's case, the ITAT, while setting aside an order passed by the commissioner of I-T (appellate), ruled that "the amounts received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax." The tribunal upheld the same view in Mr Kothari’s case. 
 
After perusing the orders issued by ITAT, the bench of justice Patil stated, "I hold that the view taken by ITAT, in both the judgments, is a correct view."
 
(Writ Petition No4958 of 2024 Date: 15 April 2024)
Comments
renukaviru
1 month ago
this is a welcome judgmentin favour of the tenant and dept should allow the
requisite refund ASAP further issue departmental circular to abide to this high court
decision
Malabar Parota Attracts 5% GST and Not 18%, Rules Kerala HC
Moneylife Digital Team 20 April 2024
Holding that Classic Malabar Parota and Whole Wheat Malabar Parota are akin or similar to the products mentioned in chapter heading 19 (of goods and services tax-GST), and the ingredients used in and the process applied in their...
Bombay HC Gives Interim Relief to Bank of Baroda in Rs150 Crore GST Demand on Monthly Average Balance Charges
Moneylife Digital Team 17 April 2024
Granting an interim relief to Bank of Baroda (BoB), the Bombay High Court (HC) restrained the tax authorities from taking any coercive recovery action against the public sector bank (PSB). The case is related to a show-cause notice...
Traders File Petition in SC against I-T Penalty Clause on MSME Credit to Buyers: Report
Moneylife Digital Team 16 April 2024
The Federation of All India Vyapar Mandal has filed a petition in the Supreme Court against Section 43B(H) of the Income Tax (I-T) Act. This newly introduced provision, part of the Finance Act 2022, limits micro and small enterprises...
Free Helpline
Legal Credit
Feedback