| Question And Answer | |
|---|---|
| Subject: | One Time Deposit for future maintenance |
| Category: | Income-Tax |
| Querist: | Ravi aiftp |
| Answered by: | Chartered Accountant ., Mr . H. N. Motiwalla |
| Tags: | One Time Deposit for future maintenance |
| Date: | January 13, 2024 |
Assessee is promoter and Builder. During the course of carrying of business, assessee accepted one time deposit from flat purchaser for future maintenance of the building. AO is of the opinion that it is taxable in the year of receipt, where as assessee is saying that is not taxable in his hands as assessee is only custodian and after deduction of expenses incurred for maintenance, will be handover the balance to society. What is the correct position?
The contention of the assessee is correct as he is a “trustee” for the amount received, and is under obligation to spend that amount for future maintenance of the building on behalf of flat owner. Therefore the amount received as one time deposit is not taxable in the hands of promoter and builder.
Section 3 of Indian Trust Act 1882, defines a ‘trust’ as under:
“A “trust” is an obligation annexed to the ownership of property , and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner:
Section further states…. The person who reposes or declares the confidence is called the author of the trust”.
the person who accepts the confidence is called the “trustee”
the person for whose benefit the confidence is accepted is called the “beneficiary”
the subject matter of the trust is called “trust property” or “trust money”
the “beneficial interest” or “interest of beneficiary” is his right against the trustee as owner of the trust property”.
Source: AIFTP Journal June 23