Mr. Pardiwala requested the court to clarify a specific point in paragraph 10 (viii) of the order dated April 2, 2024. He argued for the removal of the phrase “with the interest” from the court’s directive concerning amounts withdrawn from the Court of Small Causes. He maintained that these funds would be used as compensation or license fees for premises occupied by his client. Thus, he contended that if the court eventually decided that the amounts needed to be returned, they should not incur interest.

The court noted that its earlier order explicitly referenced interest as directed by the Court of Small Causes. It indicated that Mr. Pardiwala’s concerns could be addressed during the hearing of the R.A.D. suit, allowing the judge overseeing that case to make a final determination regarding interest.

The discussion also touched upon whether TDS should be deducted from the amounts labeled as "transit rent." Mr. Dhanani, representing another party, sought the court's direction to obtain photocopies of PAN cards from all parties involved to facilitate TDS deductions.

In response, Mr. Pardiwala argued against the deduction of TDS, citing previous rulings by the Income Tax Appellate Tribunal. He referenced two specific cases: Smt. Delilah Raj Mansukhani (ITA No. 3526/MUM/2017) and Ajay Parasmal Kothari (ITA No. 2823/MUM/2014), which he believed supported his position.

The court then examined Section 194(I) of the Income Tax Act, which mandates TDS deductions for rent payments. This section outlines that any person responsible for paying rent to a resident must deduct income tax at specified rates when making such payments.

However, it was crucial to note that the Act defines “rent” broadly, covering various arrangements for the use of land, buildings, and equipment. The court emphasized that the interpretation of "transit rent" in the current context relates to compensation for hardship endured by tenants during redevelopment, commonly referred to as hardship allowance or rehabilitation allowance.

The rulings from the Income Tax Appellate Tribunal indicated that compensation received for displacement due to redevelopment is generally considered a capital receipt, not a revenue receipt, and therefore not subject to tax. In the case of Smt. Delilah Raj Mansukhani, the tribunal concluded that such compensation does not constitute taxable income, aligning with similar decisions from previous cases.

In summary, the court determined that transit rent, characterized as hardship compensation for displaced tenants, should not be treated as taxable income. Consequently, there is no obligation for the developer to deduct TDS from these payments. This ruling underscores the importance of accurate classification of payments in the context of redevelopment and the implications for tax obligations. The clarification provided by the court will guide both parties as they navigate the complexities of their ongoing litigation.