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2024:BHC-AS:19925
504-WP-4958-2024 (C) .doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.4958 OF 2024
Sarfaraz S. Furniturewalla ...Petitioner
Versus
Afshan Sharfali Ashok Kumar & Ors. ...Respondents
____________________________________
Adv. Rustom Pardiwala i/b. Adv. Rushab V. Thacker for the
Petitioner.
AMOL
DILIPRAO
NAWALE Adv. Zaid Ansari a/w. Adv. Anmol Menion i/b. Zaid S. Ansari &
Digitally signed by
AMOL DILIPRAO Associates for Respondnet Nos. 1 and 2.
NAWALE
Date: 2024.05.01
15:49:26 +0530
Adv. Manal Dhanani i/b. Cue Legal for Respondent No.3.
____________________________________
CORAM : RAJESH S. PATIL, J.
DATED : 15 APRIL 2024
JUDGMENT :
1. The papers are allowed to be produced at 2.30 p.m., in
view of urgency
2. Mr. Pardiwala has moved this matter seeking a
clarification as regards to paragraph No.10 (viii) of Order dated 2
April 2024.
3. He submits that line No.11 the words “with the
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interest” should be deleted as according to him, the amount which
has been withdrawn from the Court of the Small Causes, would be
paid by his client towards compensation/license fee of the
premises in which his client is residing. Therefore, according to
him, if at all the Court comes to a conclusion that the amounts are
to be returned by his client, the said amounts cannot be with the
clause “Interest”.
4. In paragraph No.10 (viii) of the order dated 2 April
2024 I have very specifically mentioned that the “interest, if any, as
directed by the Court of the Small Causes”. Hence, the submissions
of Mr. Pardiwala made before this Court today, can be advanced
by him at the time of hearing and final disposal of the R.A.D Suit
and it will be the total discretion of the Judge of the Court of Small
Causes Court, who hears the R.A.D. suit, to decide whether
interest would be payable.
5. Mr. Dhanani, sought directions from this Court that
both the parties i.e., the petitioner, respondent nos. 1 and 2, be
directed to provide photo copy of their Pan Cards, so that his client
will deduct the TDS from the amount payable to them as “transit
rent”.
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6. Mr. Pardiwala submitted that there is no question of
deduction of TDS from the transit rent. Mr. Pardiwala submitted
that the said issue has already been covered by 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)
7. I have heard Mr. Dhanani and Mr. Pardiwala on the
issue as to 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?.
8. For the said purpose, it will be necessary, to consider
section 194 (I) of the Income Tax Act.
Sec. 194(I) of the Income Tax Act, reads as under :
Sec.194 (I) - Rent
“ Any person, not being an individual or a Hindu
undivided family, who is responsible for paying to a
resident] any income by way of rent, shall, at the
time of credit of such income to the account of the
payee or at the time of payment thereof in cash or by
the issue of a cheque or draft or by any other mode,
whichever is earlier, deduct income-tax thereon at the
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rate of -
[(a) two per cent. for the use of any machinery or
plant or equipment; and
(b) ten per cent. for the use of any land or building
(including factory building) or land appurtenant to a
building (including factory building) or furniture or
fittings:]
Provided that no deduction shall be made
under this section where the amount of such income
or, as the case may be, the aggregate of the amounts of
such income credited or paid or likely to be credited or
paid during the financial year by the aforesaid person
to the account of, or to, the payee, does not exceed
5[two hundred and forty thousand rupees]:
[Provided further that an individual or a
Hindu undivided family, whose total sales, gross
receipts or turnover from the business or profession
carried on by him exceed the monetary limits specified
under clause (a) or clause (b) of section 44AB during
the financial year immediately preceding the financial
year in which such income by way of rent is credited
or paid, shall be liable to deduct income-tax under this
section:]
[Provided also that no deduction shall be
made under this section where the income by way of
rent is credited or paid to a business trust, being a
real estate investment trust, in respect of any real
estate asset, referred to in clause (23FCA) of section
10, owned directly by such business trust.]
Explanation.—For the purposes of this section,—
[(i) “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) any,—
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including factory
building); or
(d) machinery; or
(e) plant; or
(f) equipment; or
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(g) furniture; or
(h) fittings,
whether or not any or all of the above are owned by
the payee;]
(ii) where any income is credited to any account,
whether called “Suspense account” or by any other
name, in the books of account of the person liable to
pay such income, such crediting shall be deemed to be
credit of such income to the account of the payee and
the provisions of this section shall apply accordingly.]”
[Emphasis Supplied]
8.1. The relevant factor which has to be borne in mind is
that section 194 (I) of the Income Tax Act refers to Rent, and in
explanation to the section, the term “Rent” is clarified.
9. It will also be necessary to consider the two authorities
referred by Mr. Pardiwala of Income Tax Appellate Tribunal viz . (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) follows Delilah
Mansukhani(Supra).
9.1. Paragraph No. 5 of the Delilah Mansukhani (Supra)
reads as under :
“5. After hearing the rival submissions and perusing
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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 de-
development 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
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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.”
[Emphasis Supplied]
9.2. Ajay Kothari (supra) follows judgment of
Delilah Mansukhani (supra). I hold that the view taken by
Income Tax Appellate Tribunal, in both the judgments, is a
correct view .
10. 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
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the tenant who suffers hardship due to dispossession.
Hence, in my opinion ‘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.
(RAJESH S. PATIL, J.)
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