One Time Deposit for future maintenance

Question 1:

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”.

Character of land at the time of sale:

Question 2:

A is holding rural agricultural land since before 2001. Subsequently he has converted such land as NA land and now sold it. Question is which value should be consider for 2001? Agriculture land value or NA land value? Any other suggestion for computation of capital gains.


At the time of sale it is Non Agricultural land. Therefore the value of land in 2001 should be considered as Non Agricultural land, as it was converted in 2001 as Non Agricultural Land. Before 2001 it was rural agricultural land but that has no significance after conversion.

Thus non agricultural land is a ‘capital asset’ within S. 2(14) of the Act, hence, it is to be decided having regard to the facts prevailing at the time it is transferred and not at the time it was acquired as per M. Venkatesar v. CIT [144 ITR 886 (Mad)]

In Sarifabibi Mohamed Ibrahim & Others v. CIT [204 ITR 631 (SC)] has held that in order to qualify for exemption it is not enough that the land was once agricultural land, it must be agricultural land at the time of sale.

Distinction between “Burden of Proof” and “Onus of Proof”

Question 3:

What is a distinction between “Burden of Proof” and “Onus of Proof”?


The Income tax Appellate Tribunal, Mumbai in Raw Presery (P) Ltd v. ACIT [143 Taxmann. com 158] has minutely pointed out difference between two, while discussing rigors of section 68 of the Income tax Act, 1961 as under:

“The said provision casts the initial burden to prove the nature of credit on the recipient, i.e. the assessee. There is a marked distinction between “onus of Proof” and “ burden of proof”. The “burden of proof” lies on a person who has to prove a fact initially and if he fails to prove it, when asked to do so by the Assessing Officer, then the Assessee Officer can draw adverse inference against the assessee under section 68 of the Act. But if the assessee discharges its burden / obligation and prove the nature and source of the credit entries to the Assessing Officer’s satisfaction, then the ‘onus of proof’ shifts on the Assessing Officer. However, for the purpose of section 68 of the Act, the ‘burden of proof’ begins with the assessee and once the assessee submits evidence in support of the credit and makes out a prime facie case, then the ‘onus of proof’ shifts to the Revenue. Such shifting of ‘onus’ is a continuous process in the evaluation of evidence. If the evidence on record weighs in favour of the assessee [based on pre-ponderance of probability which is the standard of proof required in income tax assessment] or that the explanation put forth cannot be said to be completely unsatisfactory, then the onus cast upon the assessee under section 68 of the Act can be said to have been discharged. In view of the foregoing we are of the considered view that the initial burden on the assessee was only to substantiate the source of its share premium inasmuch as the identity and creditworthiness of the investors along with the genuineness of the transaction”.

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