Refundable security deposit under a development agreement was not transfer consideration, so no TDS liability arose.

A refundable security deposit under a joint development agreement was not treated as consideration for transfer of immovable property because the agreement made the landowners' share in the constructed area the contractual consideration, while the deposit was a separate amount to secure performance and was adjustable against that share. The arrangement also stated that entry and development rights were not delivery of possession in part performance, and the factual findings showed that construction had not commenced or satisfied the conditions for a transfer under section 2(47)(v). As the deposit was not the consideration covered by section 194-IA, no tax deduction at source was required and the payer could not be treated as an assessee in default under sections 201(1) and 201(1A).

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Issues: Whether refundable security deposit paid under a joint development agreement was consideration for transfer of immovable property so as to attract tax deduction at source under section 194-IA of the Income-tax Act, 1961, and whether, on that basis, the assessee could be treated as an assessee in default under sections 201(1) and 201(1A).

Analysis: The agreement treated the land owners' share in the constructed area as the contractual consideration for the land to be conveyed to the developer. The refundable security deposit was a separate amount stipulated to secure performance of the development obligations and was recoverable through adjustment against the owners' constructed area. The agreement also recorded that mere entry and development rights were not to be construed as delivery of possession in part performance under section 53A of the Transfer of Property Act, 1882. On the facts found, construction had not commenced and the conditions necessary to treat the arrangement as a transfer in the sense relevant to section 2(47)(v) were not satisfied. Since the amount paid as refundable security deposit was not the consideration for transfer contemplated by section 194-IA, the payer was not required to deduct tax at source on that amount.

Conclusion: The refundable security deposit did not attract section 194-IA, and the assessee could not be treated as an assessee in default under sections 201(1) and 201(1A).

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