Short term capital gain

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Sreelakshmi (Querist)
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29 October 2013 hi friends,

if 3 persons purchase land and enter into joint venture people for construction of flats.

now when the consideration received by the 3 persons from joint venture, it attracts short term capital gain, so what is the next treatment in the balance sheet of the individuals ? (i.e.. they have to pay tax @ 10% ) ??

pls reply... urgent..
thanks in advance....

Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 October 2013 1. It is not given that the such income shall be treated as short term capital gains. It is also possible to consider it as business income.

2. Normally such arrangement should considered as AOP.

Sreelakshmi

Sreelakshmi (Querist)
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29 October 2013 the property is purchased in april 2013. the business into provision stores. so it is not their nature of business...then it is their capital asset rite ???

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Sreelakshmi

Sreelakshmi (Querist)
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29 October 2013 the joint venture people will remit 10 lacs to those 3 persons as part consideration. hence there short term provisions will not attract ??

experts pls correct me if m wrong

Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 October 2013 1. with regards to treatment of capital gains or business income, it shall depend on the facts of the case:

There are several case laws in this regard, you may refer to them to see what applies best to your case:

http://indiankanoon.org/docfragment/1103867/?formInput=capital%20gains%20business%20income

http://timesofindia.indiatimes.com/business/india-business/HC-to-decide-whether-short-term-capital-gains-can-be-business-income/articleshow/18696973.cms

http://indiankanoon.org/docfragment/315701/?formInput=capital%20gains%20business%20income

http://indiankanoon.org/docfragment/412315/?formInput=capital%20gains%20business%20income

http://indiankanoon.org/docfragment/23531/?formInput=capital%20gains%20business%20income

What you need to demonstrate is that the asset was purchased for investment purpose. The problem is the purpose of construction? was the construction done for investment purpose or for selling it to buyers? This going to be the main point you need to answer.

With regards to taxation as AOP Section 86 should apply.

Sreelakshmi

Sreelakshmi (Querist)
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29 October 2013 the construction undertaken by the joint venture people is for sale.. (residential flats)....

thank u sir...
will refer to the links...

Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 October 2013 Then it is very much possible that it is considered as business income