08 June 2012
A proprietor having plot of land (long term) not treated as business asset is constructing a residential cum commercial building on the said plot. The building comprises of 2 commercial units and 6 residential units. Majority of civil work is completed as on 31.3.12.In future (by the end of FY 12.13) the commercial space will be used for his business and all or some of residential units may be sold if necessary. In view of this 1. is it necessary to recognise the Income/profit under project completion method? 2. if all or some of the residential units are sold how to recognise the long term capital gain.
08 June 2012
(1) No you have to offer income as per installment received from parties.
(2) You have to divide per square foot area of land. then cost of land less Recovery from parties(Per Square Foot)towards cost of land will be your capital gain. profit generate from construction will be your business income.
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