Corpus fund interest held not taxable as builder's income where fund belonged to the proposed society.

Interest earned on a corpus fund collected by a builder for a proposed society was held not taxable in the builder's hands where the fund was kept in a separate account for eventual transfer to the society. Under the Maharashtra Ownership Flats Act, 1963, the promoter was required to maintain separate accounts and transfer such amounts to the society, so the corpus itself was treated as belonging to the society rather than as the builder's income. The accretion by way of interest followed the same character and could not be assessed as income of the assessee. The interest addition was therefore deleted from the assessment.

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Issues: Whether interest earned on corpus fund maintained by the builder for the proposed society was assessable as the builder's income.

Analysis: The corpus fund was collected and kept in a separate account for eventual transfer to the society, and the legal framework under the Maharashtra Ownership Flats Act, 1963 required the promoter to maintain separate accounts and transfer such amounts to the society. Once the corpus fund itself was treated as belonging to the society and not as the builder's income, the accretion by way of interest on that fund also could not be brought to tax in the builder's hands.

Conclusion: The interest income was not taxable as the assessee's income and was liable to be deleted from the assessment.

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