admin August 18, 2022 0 Comments

WHERE PERSON(S) HAVING LAND WANTS TO JOIN HANDS WITH DEVELOPER ON OR AFTER 01.04.2018

FCA B.P. Mundra and Advocate Atharv Mundra

 Key words: Section 45(5A), Section 43(3), Joint Development Agreement, JDA, Capital gains, Capital gains to land owner, entered into partnership by transfer of land as capital contribution, entered into partnership by transfer of land as capital contribution or otherwise then the taxability

In the above circumstance on can go for either Joint Development Agreement (‘JDA’) or by a person to a Partnership firm / or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member. The taxability in both the circumstances to the land owner is explained as under : –

1. Section 45(5A) If Joint Development Agreement (‘JDA’) then the Capital gains to land owners arising would be taxable in the year in which the designated authorities issue a certificate of completion for the whole or part of the project subject to the following conditions:-
   • This section is applicable only to JDAs entered on or after April 01, 2018;
   • The section is applicable only where the JDA / specified agreement for the development of a project is registered;
   • Only individuals and HUFs, who are owners, can avail these beneficial provisions;
   • Capital gains arising would be taxable in the year in which the designated authorities issue a certificate of completion for the whole or part of the project
   • The owner treats the land or building as a capital asset and not as stock in trade;
   • For the purpose of consideration, the stamp duty as on the date of issue of the certificate is to be considered, and not as on the date of the transfer;
   • The owner should not transfer his share in the project before the completion of the project;
   • The section is not applicable where the entire consideration is received only in monetary terms/cash.
   • This provision aims to defer the payment of capital gain taxes to that year in which a part or whole of the project is completed, as supported by a certificate.

2. Section 45(3) If entered into partnership by transfer of land as capital contribution or otherwise then the taxability is as under:-
   • The profits or gains arising from the transfer of a capital asset shall be chargeable to tax as his income of the previous year in which such transfer takes place and,
   • for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
   • Only a person can avail these beneficial provisions when he is or becomes a partner or member to a partnership firm or other association of persons or body of individuals (not being a company or a co-operative society).
3. Hence, we need to examine on the basis of provisions mentioned above.