Tax on hardship compensation as rent every month in redevelopment

Hardship rent received by members of a society from a developer during re-development is generally considered taxable as income under the Income Tax Act.

Regarding the second part of your question, if the amount of rent reeived is not spent on housing rent, the taxability might not change solely based on the usage. The tax treatment typically depends on the nature of the receipt (whether it is a capital receipt or revenue receipt) and the tax laws applicable. Hardship rent is usually seen as a revenue receipt and thus taxable. 

Then what about Bombay High Court decision in Ajay Parasmal Kothari stating it is capital receipt not taxable

Kindly elaborate your ans with case law

https://youtube.com/watch?v=1uXYBDxiMgw&si=Nczc4CUxsLA1Tokf

https://youtube.com/watch?v=7GrYkvjeE3M&si=Dp8oLQCPVC3GR5PX

Rent received as a monthly hardship or displacement allowance during redevelopment is generally taxable in the recipient’s hands, commonly under Income from Other Sources; it is not automatically tax-free merely because it is meant to cover temporary accommodation. If the developer pays the amount directly to the landlord, that may affect the recipient’s actual receipt and tax analysis, so check the agreement and payment arrangement.

Not spending the allowance on rent does not, by itself, change its taxability. The treatment can depend on the redevelopment agreement, how the payment is characterised, and whether any specific exemption applies; keep the agreement and payment records for return reporting.

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Hardship / rent compensation received during redevelopment:
• One correction to the earlier reply: the position is not settled against the member. In Ajay Parasmal Kothari v. ITO (ITAT Mumbai, 2024), monthly compensation paid by the developer for vacating the flat was held to be a capital receipt for hardship and displacement, not taxable as income from other sources, even though the member stayed with family and did not spend it on rent.
• It is a Tribunal ruling, not a Bombay High Court judgment on the merits, so the Department may still dispute it; but it gives a strong basis for non-taxability whether or not the amount is spent on rent. Spending it on alternate accommodation only strengthens the 'compensation for displacement' character.
• Read the redevelopment agreement: if the payment is described as compensation for displacement rather than rent for any asset, the capital-receipt argument is cleaner.
• Practical: if the developer has deducted TDS, the receipt will appear in AIS. Disclose it in the ITR as exempt/capital receipt with a note, claim the TDS, and keep the agreement and payment trail ready in case of a notice.