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Capital gain

CA YOGESH GARG GMG PLYWOODS (BUSINESS OF PLYWOOD and PARTNER IN GUPTA & MALHOTRA CHARTERED ACCOUNTANTS) (248 Points)

16 August 2011

if Mr. A has a plot of land with book value of Rs. 1 lakh.. Mr. A involved in partnership with Mr. B(who constructed the building on such land)..now both partners have equal share in this land and building & market value of this L & B is Rs. 6 crores..
whether this transaction will attract any Capital Gain..If Yes, then who will b lible to Capital gain..& what will b the amount of capital gain??? plz reply

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CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 16 August 2011

Q 1. "Mr A involved in Partnership with B."

As I think just by constructing the property on A's land B does not become partner of A.

There must be certain conditions or understanding which requires elabortion.

Otherwise, in the absence of any thing clearer, A is the owner and B is the builder or developer. A may pay B the construction cost only.

Q 2.Whether A introduces the asset in said partnership ? If yes ... then How B being a partner can alone do the construction. It is the firm who carry on the construction.

Q3. Capital gain does not arise on the basis of market value. It requires a transaction of actual sale or transfer.

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Originally posted by : Paras Bafna
	Q 1. "Mr A involved in Partnership with B." As I think just by constructing the property on A's land B does not become partner of A. There must be certain conditions or understanding which requires elabortion. Otherwise, in the absence of any thing clearer, A is the owner and B is the builder or developer. A may pay B the construction cost only. Q 2.Whether A introduces the asset in said partnership ? If yes ... then How B being a partner can alone do the construction. It is the firm who carry on the construction. Q3. Capital gain does not arise on the basis of market value. It requires a transaction of actual sale or transfer.

agree with paras bafna sir..........

varahi (STUDENT) (2373 Points)
Replied 17 August 2011

A is the owner and capital gain doesnt arise here...

CA YOGESH GARG GMG PLYWOODS (BUSINESS OF PLYWOOD and PARTNER IN GUPTA & MALHOTRA CHARTERED ACCOUNTANTS) (248 Points)
Replied 17 August 2011

Mr. A owned the land & Mr. B has to construct building (mall) on that...nw as per joint venture terms cinema is with Mr. A & all other shops are with Mr. B...now whether Mr. A is lible for LTCG on such t/f of land to J.V.??? Sale consideration for LTCG for Mr. A will be the price of land taken i.e. Rs. 6 crore as per J.V. agreement.. Sec 50C will apply or not??? Book Value of land at the time of agreement is Rs. 100000/-.. both are equal holder in land & building...