'Transit Rent' Can't Be Considered As 'Revenue Receipt', Not Liable To Be Taxed: Bombay High Court

The Bombay High Court has held that 'Transit Rent' is not to be considered a revenue receipt and is not liable to be taxed. As a result, there will be no question of the deduction of TDS from the amount payable by the developer to the tenant.

The bench of Justice Rajesh S. Patil has observed that the ordinary meaning of rent would be an amount that the tenant or licensee pays to the landlord or licensee. In the present proceedings, the term used is “transit rent," which is commonly referred to as a hardship allowance, rehabilitation allowance, or displacement allowance, which is paid by the developer or landlord to the tenant who suffers hardship due to dispossession.

The respondent/developer sought photocopies of the PAN cards of the owners/petitioner to deduct TDS from the amount payable as `transit rent.'

The petitioner contended that there is no question of the deduction of TDS from the transit rent.

Section 194(I) of the Income Tax Act refers to rent, and in the explanation of the section, the term “rent” is clarified. “Rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy, or any other agreement or arrangement for the use of (either separately or together).

The court held that the amounts received by the assessee as hardship compensation, rehabilitation compensation, and for shifting are not liable to tax.

Counsel For Petitioner: Rustom Pardiwala

Counsel For Respondent: Zaid Ansari

Case Title: Sarfaraz S. Furniturewalla Versus Afshan Sharfali Ashok Kumar & Ors.

Case No.: Writ Petition No.4958 Of 2024

Click Here To Read The Order