Redevelopment consideration taxed in members' hands, not the society's, and refundable deposit excluded from sale consideration.

Under a redevelopment agreement executed by a co-operative housing society, the consideration was held taxable in the hands of the individual flat owners, not the society, because the members were the beneficial owners and the developer's obligations ran to them; the society acted only as a representative signatory. The refundable amount received from the developer was treated as a security deposit to be returned on completion of the project and not as part of the sale consideration. On that basis, the addition in the society's hands was unsustainable, and the penalty based on the same addition could not survive.

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Issues: Whether consideration arising from a redevelopment agreement executed by a co-operative housing society is taxable in the hands of the society or in the hands of the individual flat owners, and whether the refundable amount received under the agreement forms part of the taxable consideration.

Analysis: The redevelopment agreement showed that the members of the society were the beneficial owners of the flats and that the developer's obligations and payments were to flow to those individual members. The society acted only as a representative signatory for the redevelopment arrangement. The refundable amount received from the developer was found to be a security deposit meant to be returned on completion of the project and was not part of the sale consideration. On that basis, the addition made in the hands of the society was unsustainable. As the quantum addition failed, the penalty based on the same addition also could not survive. The cross-objection challenges were rendered infructuous after dismissal of the Revenue's appeal.

Conclusion: The redevelopment consideration was not taxable in the hands of the society, and the refundable amount was not assessable as consideration; the Revenue's appeal failed, and the penalty sustained no independent basis.

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