The Bombay High Court has clarified a critical principle in slum rehabilitation law: transit rent payable to eligible occupants must commence from the date of demolition of their structure, not from the date they are formally declared eligible. This ruling resolves longstanding ambiguity and reinforces the compensatory intent of rehabilitation policies.
Background & Facts
The Dispute
These consolidated writ petitions were filed by multiple slum dwellers in Mumbai who were declared eligible for rehabilitation under the Slum Rehabilitation Authority (SRA) scheme. The petitioners challenged the practice of the developer-respondent (Respondent No. 6) in paying transit rent only from the date their eligibility was certified, rather than from the date their dwellings were demolished. The petitioners contended that this delay deprived them of rightful compensation during the period between demolition and eligibility determination.
Key Facts
- The petitioners were residents of structures demolished by the SRA for urban redevelopment
- Eligibility for rehabilitation was determined after verification processes, with certification dates varying across petitioners
- The developer paid transit rent only from the date of eligibility certification, not from the date of demolition
- The SRA Circular No. 153 dated 06.06.2015, which mandates payment of transit rent from the date of demolition, was invoked by petitioners
- The developer argued that Circular No. 153 was under challenge in a separate writ petition (WP No. 4804 of 2025)
- The developer also deducted 10% TDS from transit rent payments, claiming statutory obligation
Procedural History
- Various dates in 2023 - 2024: Petitioners filed individual writ petitions before the Bombay High Court (WPs No. 4669, 4670, 4671, 4674, 4678, 4683 of 2024)
- Consolidated hearing: All petitions were heard together on 08.04.2026
- No interim orders were granted prior to this judgment
- No stay was in effect on Circular No. 153 despite pending challenge in WP No. 4804 of 2025
The Parties' Positions
Petitioners: Argued that transit rent is a hardship allowance for displacement, and its purpose is to mitigate loss from the moment of eviction. Delaying payment until eligibility certification defeats the compensatory objective. Relied on Sarfaraz S. Furniturewalla v. Afshan Sharfali Ashok Kumar and Smt. Kusum Subhash Baisane v. State of Maharashtra.
Respondent Developer (No. 6): Contended that payment should commence only upon formal eligibility determination, as administrative systems require time to verify claims. Also argued that TDS deduction was mandatory under Income Tax Act.
State of Maharashtra (Respondents 1 - 5): Supported the developer’s position on timing of rent, but did not oppose the legal position on TDS.
Relief Sought
- Declaration that transit rent must be paid from the date of demolition
- Refund of all TDS amounts illegally deducted from transit rent
- Direction to the developer to pay arrears within a specified period
- Clarification that pending challenge to Circular No. 153 does not suspend its operation
The Legal Issue
The central questions were: (1) Whether transit rent for eligible slum dwellers must be paid from the date of demolition or from the date of formal eligibility certification; and (2) Whether transit rent is liable to tax at source (TDS) under the Income Tax Act.
Arguments Presented
For the Petitioner
The petitioners relied on two key precedents. First, in Smt. Kusum Subhash Baisane v. State of Maharashtra, the Court held that if a slum dweller was residing in the structure prior to the cutoff date (1.1.2000), their eligibility relates back to the date of demolition, making them entitled to rent from that date. Second, in Sarfaraz S. Furniturewalla v. Afshan Sharfali Ashok Kumar, the Court held that transit rent is not a revenue receipt but a hardship allowance, and therefore not subject to TDS. The petitioners emphasized that the purpose of transit rent is to provide immediate relief upon dispossession, and any delay undermines the rehabilitative intent of the law.
For the Respondent
The developer argued that eligibility determination is a prerequisite for payment, and that Circular No. 153 is under judicial challenge. They contended that paying rent from the date of demolition would create administrative chaos and financial liability before verification. On TDS, they claimed compliance with statutory obligations under Section 194-I of the Income Tax Act, and that deduction was made in good faith.
The Court's Analysis
The Court rejected the developer’s argument that the pending challenge to Circular No. 153 warranted suspension of its operation. The Court noted that no stay had been granted, and the circular remained in force. The Court then affirmed the principle established in Smt. Kusum Subhash Baisane: "If on the date of demolition the slum dweller is construed to be eligible, then he would be entitled to the transit rent from the date of demolition."
"What is of relevance is the date of demolition. If on the date of demolition the slum dweller is construed to be eligible, then he would be entitled to the transit rent from the date of demolition."
The Court further held that the developer’s reliance on administrative convenience cannot override the statutory and humanitarian purpose of transit rent. The Court emphasized that eligibility is not a condition precedent to entitlement - it is a retrospective determination of a pre-existing right.
On the TDS issue, the Court squarely applied Sarfaraz S. Furniturewalla, observing that transit rent is not rent in the ordinary sense but a displacement allowance. The Court stated: "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."
The Court held that such payments are not taxable income and therefore not subject to TDS. The developer’s compliance with Income Tax Department directives does not override binding judicial precedent.
The Verdict
The petitioners succeeded on both grounds. The Court directed the developer to pay transit rent arrears from the date of demolition of each petitioner’s structure, with payment to be completed within four months from today. The Court further directed the developer to refund all amounts deducted as TDS from transit rent payments, also within four months. In case of disputes over the quantum of arrears, petitioners may approach the Special Cell constituted under the Court’s order dated 23.12.2025 in Om Shri Sai SRA Co-operative Housing Society v. State of Maharashtra.
What This Means For Similar Cases
Transit Rent Is Retroactive to Demolition
- Practitioners must now argue that eligibility determination is not a trigger for rent - demolition is
- Any delay in certification cannot justify withholding rent; the right vests on demolition
- Developers cannot use administrative delays as a defense for non-payment
- Claimants should calculate arrears from demolition date, not eligibility date, in all pending claims
TDS on Transit Rent Is Unlawful
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No TDS deduction is permissible on transit rent, hardship allowance, or rehabilitation payments
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Developers must reverse all TDS deductions made since the Sarfaraz judgment (2024)
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Petitioners may file refund claims with the Income Tax Department using this judgment as authority
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Tax consultants must update advisory protocols to exclude transit rent from TDS applicability
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Where developers have already deposited TDS, they must seek refund from the Income Tax Department, not withhold payment from beneficiaries
