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)
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
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