In a recent decision the Bombay High Court observed that ‘Transit Rent’ cannot be taxed as revenue receipt.
The counsel for the petitioner sought clarification regarding the impugned order wherein the words “with the interest” should be deleted as according to him, the amount which has been withdrawn from the Court of the Small Causes, would be paid by his client towards compensation/license fee of the premises in which his client is residing.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”.
The counsel for the petitioner submitted that there is no question of deduction of TDS from the transit rent.
The counsel for the respondent sought directions from the 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”.
Section 194 (I) of the Income Tax Act refers to Rent, and in explanation to the section, the term “Rent” is clarified. Section 194I of the income tax covers TDS on rent. It imposes an obligation for TDS deduction on persons (other than individual/HUF who are not subject to audit) making rental payments to resident Indians above a specified limit, i.e., Rs.2,40,000 in a year. The rent under this section broadly includes house rent, machine rent, building rent, office rent, furniture rent etc.
A Single Bench of Justice Rajesh S Patil observed 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, 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.”
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