As a developer under a redevelopment agreement I pay tenants a monthly sum for alternate accommodation and a hardship allowance. The TDS officer says every sum paid under the agreement attracts section 194-IC at ten per cent. Is he right?
No. The Tribunal held that a sum is within section 194-IC only if it is consideration paid as part of a share in the land or building or both under a specified agreement, including cash payments forming part of that share. Alternate accommodation charges and hardship allowance are compensation for the hardship of dispossession and for rent payable elsewhere until redevelopment is complete; they are not a share in the land or building, so section 194-IC does not apply and the developer is not an assessee in default for not deducting.
Decided by the ITAT (Shri Pavan Kumar Gadale, Judicial Member and Ms. Padmavathy S, Accountant Member) on 2024-07-11, reported as I.T.A. Nos. 4174 and 4171/Mum/2023; Assessment Years 2018-19 and 2019-20 (ITAT Mumbai). It bears on section 194-IC, section 45(5A), section 194-IA of the Income Tax Act 1961, in TDS Defaults, Capital Gains and House Property matters.
Section 194-IC is drafted by reference to the specified agreement in section 45(5A), and the temptation on the TDS side is to read 'any sum by way of consideration under the agreement' as covering everything the developer pays under that document. This order supplies the limiting principle: the word 'consideration' is not defined for section 194-IC, so it takes its content from the definition of 'specified agreement' — a share in the land or building or both, with or without part of the consideration in cash. Payments that compensate for displacement fall outside. The point matters in practically every urban redevelopment, where displacement payments often exceed the cash component of the deal, and it was followed by another Mumbai Bench in ITO (TDS) v N Rose Developers Pvt Ltd on 30 January 2025. It says nothing about whether such receipts are taxable in the recipient's hands, which is a separate question.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a developer, entered into a redevelopment agreement with Dalal Estate Cooperative Housing Society Ltd under which it agreed to pay a fixed sum per square foot to each tenant for temporary alternate accommodation, the existing property being due for demolition. The TDS officer treated those payments as sums paid by way of consideration under a specified agreement referred to in section 45(5A) and held the assessee in default for failing to deduct tax at ten per cent under section 194-IC. The CIT(A) upheld that view. Before the Tribunal the assessee characterised the payments as compensation for tenant hardship and for the cost of temporary accommodation; the Departmental Representative argued that for the purpose of section 194-IC, section 45(5A) should be applied only to the limited extent of 'any payments done under the specified agreement', so that all payments under the redevelopment agreement attracted deduction.
The appeals of the assessee for AYs 2018-19 and 2019-20 were allowed (paragraph 11). Any sum paid under a specified agreement, to be treated as 'consideration' for section 194-IC, should have been paid as part of a share in the land or building or both, including cash payments. Alternate accommodation charges and rent are compensation paid by the developer for the hardship suffered by the owner or tenant on dispossession and are not paid as part of a share in the land or building or both; they therefore do not fall within section 194-IC, the assessee cannot be treated as an assessee in default for non-deduction and non-payment, and the order of the Assessing Officer was set aside (paragraph 10).
The Tribunal read section 194-IC together with the definition of 'specified agreement' in the Explanation to section 45(5A), both of which it reproduced. Because 'consideration' is not separately defined for section 194-IC, its meaning had to be inferred from that definition — an agreement between the owner and the developer allowing the developer to develop a real estate project in consideration of a share in the land or building or both, with or without payment of part of the consideration in cash. Applying that, a payment qualifies only if it is paid as part of such a share. On the terms of this agreement the payment was made towards compensation for handing over vacant possession for demolition and towards the rent payable by the tenants in alternate accommodation until redevelopment was complete, which is not a share in the land or building (paragraphs 9 and 10).
Therefore we are of the view that the "Alternate accommodation charges / rent" cannot be treated as a consideration paid as part of a share in the land or building or both under the specified agreement, and would not fall within the provisions of section 194IC.
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal held that a sum is within section 194-IC only if it is consideration paid as part of a share in the land or building or both under a specified agreement, including cash payments forming part of that share. Alternate accommodation charges and hardship allowance are compensation for the hardship of dispossession and for rent payable elsewhere until redevelopment is complete; they are not a share in the land or building, so section 194-IC does not apply and the developer is not an assessee in default for not deducting. This was decided by the ITAT (Shri Pavan Kumar Gadale, Judicial Member and Ms. Padmavathy S, Accountant Member) and bears on section 194-IC, section 45(5A), section 194-IA of the Income Tax Act 1961. It is reported as I.T.A. Nos. 4174 and 4171/Mum/2023; Assessment Years 2018-19 and 2019-20 (ITAT Mumbai). Section 194-IC is drafted by reference to the specified agreement in section 45(5A), and the temptation on the TDS side is to read 'any sum by way of consideration under the agreement' as covering everything the developer pays under that document. This order supplies the limiting principle: the word 'consideration' is not defined for section 194-IC, so it takes its content from the definition of 'specified agreement' — a share in the land or building or both, with or without part of the consideration in cash. Payments that compensate for displacement fall outside. The point matters in practically every urban redevelopment, where displacement payments often exceed the cash component of the deal, and it was followed by another Mumbai Bench in ITO (TDS) v N Rose Developers Pvt Ltd on 30 January 2025. It says nothing about whether such receipts are taxable in the recipient's hands, which is a separate question. If it applies to you, the first step is this: Read the agreement and separate the two streams: what is paid as, or on account of, the owner's or tenant's share in the developed property (including any cash component of that share), and what is paid to compensate for vacating and for rent elsewhere. Only the first stream is exposed to section 194-IC.
The assessee, a developer, entered into a redevelopment agreement with Dalal Estate Cooperative Housing Society Ltd under which it agreed to pay a fixed sum per square foot to each tenant for temporary alternate accommodation, the existing property being due for demolition. The TDS officer treated those payments as sums paid by way of consideration under a specified agreement referred to in section 45(5A) and held the assessee in default for failing to deduct tax at ten per cent under section 194-IC. The CIT(A) upheld that view. Before the Tribunal the assessee characterised the payments as compensation for tenant hardship and for the cost of temporary accommodation; the Departmental Representative argued that for the purpose of section 194-IC, section 45(5A) should be applied only to the limited extent of 'any payments done under the specified agreement', so that all payments under the redevelopment agreement attracted deduction. The matter was decided on 2024-07-11 by the ITAT (Shri Pavan Kumar Gadale, Judicial Member and Ms. Padmavathy S, Accountant Member). On those facts the ITAT held as follows. The appeals of the assessee for AYs 2018-19 and 2019-20 were allowed (paragraph 11). Any sum paid under a specified agreement, to be treated as 'consideration' for section 194-IC, should have been paid as part of a share in the land or building or both, including cash payments. Alternate accommodation charges and rent are compensation paid by the developer for the hardship suffered by the owner or tenant on dispossession and are not paid as part of a share in the land or building or both; they therefore do not fall within section 194-IC, the assessee cannot be treated as an assessee in default for non-deduction and non-payment, and the order of the Assessing Officer was set aside (paragraph 10).
The Tribunal read section 194-IC together with the definition of 'specified agreement' in the Explanation to section 45(5A), both of which it reproduced. Because 'consideration' is not separately defined for section 194-IC, its meaning had to be inferred from that definition — an agreement between the owner and the developer allowing the developer to develop a real estate project in consideration of a share in the land or building or both, with or without payment of part of the consideration in cash. Applying that, a payment qualifies only if it is paid as part of such a share. On the terms of this agreement the payment was made towards compensation for handing over vacant possession for demolition and towards the rent payable by the tenants in alternate accommodation until redevelopment was complete, which is not a share in the land or building (paragraphs 9 and 10). In the words reproduced by the source cited on this page: "Therefore we are of the view that the "Alternate accommodation charges / rent" cannot be treated as a consideration paid as part of a share in the land or building or both under the specified agreement, and would not fall within the provisions of section 194IC."
It was decided by the ITAT on 2024-07-11 and is reported as I.T.A. Nos. 4174 and 4171/Mum/2023; Assessment Years 2018-19 and 2019-20 (ITAT Mumbai). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 194-IC, section 45(5A), section 194-IA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals of the assessee for AYs 2018-19 and 2019-20 were allowed (paragraph 11). Any sum paid under a specified agreement, to be treated as 'consideration' for section 194-IC, should have been paid as part of a share in the land or building or both, including cash payments. Alternate accommodation charges and rent are compensation paid by the developer for the hardship suffered by the owner or tenant on dispossession and are not paid as part of a share in the land or building or both; they therefore do not fall within section 194-IC, the assessee cannot be treated as an assessee in default for non-deduction and non-payment, and the order of the Assessing Officer was set aside (paragraph 10). It arises in TDS Defaults, Capital Gains and House Property matters, on section 194-IC, section 45(5A), section 194-IA of the Income Tax Act 1961, and was decided by Shri Pavan Kumar Gadale, Judicial Member and Ms. Padmavathy S, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Document the second stream on its own terms — a fixed sum per square foot for temporary alternate accommodation, tied to handing over vacant possession and running until completion — because that characterisation is what carried the case. If a section 201(1)/201(1A) order has been passed, take this decision and the N Rose Developers order before the CIT(A) and press the definitional argument rather than a general hardship plea. Do not assume the point resolves the deductee's position: consider separately whether the recipient is chargeable on the receipt, and whether some other deduction provision (for example section 194-IA on a purchase, or section 194-I on rent) is engaged on the facts. Check the date of the redevelopment agreement against 1 April 2017, since section 194-IC operates by reference to an agreement referred to in section 45(5A).
Searched for later treatment; none was found. That is not the same as a source affirming it. The citator returns nothing. A name search returns 46 documents; the assessee's Bombay High Court matters of 29 March 2022 and 13 March 2024 predate this order, and the later ones against the Union of India were checked — WP(L) 23743 of 2025, decided 13 October 2025, is a GST audit matter under Rule 101 of the CGST Rules and has nothing to do with section 194-IC. No income-tax appeal against this order was found, and nothing applying or doubting the holding that alternate accommodation and hardship payments are outside section 194-IC because they are not consideration forming part of a share in land or building. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
There is an unresolved date conflict on the face of the material. The raw text of paragraph 9 records the redevelopment agreement with Dalal Estate Cooperative Housing Society Ltd as 'dated 30.07.2007', while a summarised rendering of the same order gave 30 April 2017. The 2007 date is what appears in the raw fragment and is stated here, but it is difficult to reconcile with a section 194-IC charge, which operates only on sums paid under an agreement referred to in section 45(5A) — a provision inserted with effect from 1 April 2018 — and the order does not address that. Verify the agreement date from the order itself before relying on it. Paragraphs 9, 10 and 11 and the bench composition were read verbatim through fragment views; the remainder of the order, including the amounts in dispute, was read only in summarised form and the figures are therefore not stated here. Paragraph 7.3.1 as it appears on the page prints 'Section 19:41C' for section 194-IC, an evident scanning artefact, and prints the section 194-IC text with the cross-reference to 'section 194-1A' for section 194-IA. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals of the assessee for AYs 2018-19 and 2019-20 were allowed (paragraph 11). Any sum paid under a specified agreement, to be treated as 'consideration' for section 194-IC, should have been paid as part of a share in the land or building or both, including cash payments. Alternate accommodation charges and rent are compensation paid by the developer for the hardship suffered by the owner or tenant on dispossession and are not paid as part of a share in the land or building or both; they therefore do not fall within section 194-IC, the assessee cannot be treated as an assessee in default for non-deduction and non-payment, and the order of the Assessing Officer was set aside (paragraph 10).
TaxSphere, “Nathani Parekh Constructions Pvt Ltd v ITO (TDS) (ITAT Mumbai) — section 194-IC does not reach alternate accommodation and hardship compensation paid under a redevelopment agreement”, https://taxnotice.vittsphere.com/caselaw/case/nathani-parekh-constructions-v-ito-tds-194ic-alternate-accommodation-not-consideration/ (validity last checked 2026-09-08)
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