1. Transit Rent During Redevelopment is a Capital Receipt. Therefore TDS cannot be done held by Bombay High court:

This was held by Justice Rajesh S Patil IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.4958 OF 2024 in the matter of Sarfaraz S. Furniturewalla v. Afshan Sharfali Ashok Kumar & Ors.

A issue was raised before the Hon’ble High Court, whether there should be deduction of TDS on the amount payable to Petitioner and Respondent Nos.1 & 2 as “Transit Rent”, by the developer / builder?

It was held that the ordinary meaning of Rent would be an amount which the Tenant / Licensee pays to the Landlord / Licensor. In the present proceedings the term used is “Transit Rent”, which is commonly referred as Hardship Allowance / Rehabilitation Allowance / Displacement Allowance, which is paid by the Developer / Landlord to the tenant who suffers hardship due to dispossession. Hence, ‘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 T.D.S. from the amount payable by the Developer to the tenant.

The Hon’ble High Court relied upon two orders passed by Income Tax Appellate Tribunal in the matter of (i) Smt. Delilah Raj Mansukhani in ITA No. 3526/MUM/2017 (Assessment Year : 2010-2011), and (ii) Ajay Parasmal Kothari in ITA No. 2823/MUM/(A.Y : 2013-2014) and held that the Transit rent is not a revenue receipt and hence is TDS cannot be done.

The relevant extract of both the ITAT orders recorded in the present order reads as under:

“Paragraph No. 5 of the Delilah Mansukhani (Supra) reads as under : “5. After hearing the rival submissions and perusing the material on record, we find that compensation received by the assessee towards displacement in terms of Development Agreement is not a revenue receipt and constitute capital receipt as the property has gone into re-development. In such scenario, the compensation is normally paid by the builder on account of hardship faced by owner of the flat due to displacement of the occupants of the flat. The said payment is in the nature of hardship allowance / rehabilitation allowance and is not liable to tax.

The case of the assessee is squarely supported by the decision of the Co-ordinate Bench in the case of Shri Devshi Lakhamshi Dedhiavs. ACIT in ITA No.5350/Mum/2012 wherein similar issue has been decided in favour of the assessee, the relevant operative portion is reproduced hereunder:-

15. We have considered the rivals submissions and perused the materials on records. We note that the assessee received compensation of Rs. 19,50,873/- from the developer when the building in which the assessee owned flat went for re-development as per the agreement between the developers and flat owners dated 28.03.2008. The said compensation was paid towards hardship Rs, 13,45,278/-; rehabilitation Rs, 5,90,625/- and for shifting Rs. 15,000/-.We also note that the assessee paid Rs. 18,63,000/- to Joys Developers for acquiring additional area of 138 Sq Ft. It was also noted that the assessee shifted to his own house when the building went for re-development. Now the question before is whether the compensation upon re-development of property towards hardship, rehabilitation and shifting received by the assessee is taxable if the potential TDR/FSI is available to the land owner or society which owns the (and depending upon .the terms of the redevelopment agreement without transferring the land . In the present case the assessee who was flat owner in the building was member of the society, As per the agreement each member of the society including the assessee was to be given a flat in lieu of the old one and the each member including the assessee was given compensation. We also note that In the decisions in 1TA No 72/Mum/2012 assessment year 2008-09 Bench E and ITA No 5271/Mum/2012 assessment year 2008-09 Bench “D” the Tribunal held that the amounts received as compensation for hardship, rehabilitation and for shifting are not liable to tax We, therefore, respectfully, the above decisions are of the considered view that the amounts received by the assessee as hardship compensation, rehabilitation compensation and for shifting are not liable to tax and the order passed by the first appellate authority can not be sustained. Thus the order of CIT(A) is reversed and ground is allowed in favour of the assessee. 16. In the result, appeal of the assessee is partly allowed, as above.”

2. Bombay Upholds ‘Peculiar’ Procedure Adopted By SRA Housing society in selecting the Developer for redevelopment of their slum:

This is the case of Shramasafalya Co-Operative Housing Society to Select A Developer For Juni Sherli Slum. Bombay HC upholds ‘peculiar’ procedure adopted by Shramasafalya Co-operative Housing Society to select a Developer for Juni Sherli Slum The Court noted that the case was not about simultaneous proposals, and the respondents had followed the requisite procedure and the Departmental decision to reconduct voting by secret ballot was to ensure a fair selection.

In the instant case, the petitioner had challenged an order of the Apex Grievance Redressal Committee (“AGRC”), rejecting the petitioner’s application in respect of an approved proposal submitted by Respondent 5 for the implementation of a Slum Rehabilitation Scheme (“SRS”). The petitioner was aggrieved by the subsequent direction of re-election for the appointment of a developer for SRS and had prayed for the processing of his earlier made proposal for the implementation of the SRS. Another question before the Court was to determine the exact stage at which a proposal for implementation of SRS can be said to have been ‘accepted’ to oust consideration of any further proposal.

The single-judge bench of Sandeep V. Marne, J*., considered the peculiar facts of the instant case where two general body meetings were conducted by Shramasafalya Co-operative Housing Society in short gap of 8 days and favouring selection of two different developers each time vis-a-vis implementation of SRS for Juni Sherli Slum.

The Court found that the respondents had followed the prescribed procedure and determined that the decision of the Executive Engineer to admit the proposal for further process as the stage of “acceptance” of such proposal.