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Capital gain tax

Rem (Practicer) (125 Points)

28 June 2016

A joint venture agreement has been done between the land owner and property developer for developing a project and a part consideration of Rs.50 Lakhs received by land owner and balance will be settled in installments with in two years. Now I want to know when the capital gain tax arises and how the full consideration to be calculated? What would be the treatment for Rs.50 Lakhs part consideration received.

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4 Replies

CA MANISH BINDAL (CHARTERED ACCOUNTANT ) (535 Points)
Replied 28 June 2016

As per section 45(1)

Any Profit and gains arising from transfer of a capital asset effected in the previous year shall be chargable to tax under the head capital gains in the previous year in which transfer took place. Without taking view that consideration is received in installment. Hence as per your query the amount will be taxable in the year in which property get transferred.

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Rem (Practicer) (125 Points)
Replied 28 June 2016

Manish Thank you for your reply. Whether capital gain arises on signing the agreement or on transferring the posession of land to builder. And cosideration is calculated on market value of land or on the cost of construction met by builder on the land owners share [ITO V. Sri N.S.Nagaraj (ITA No.676/Bang/2011 - Ay 2007-08)]

CA MANISH BINDAL (CHARTERED ACCOUNTANT ) (535 Points)
Replied 28 June 2016

if possession of property is transfered before agreement is done then date of transfered will be the date on which possession has been transfered.

As per section 50D:- Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertaibale or cannot be deteremined, then for the purpose of computing income chargable to tax as capital gain, the fair market value of the said asset on the date of transfer shall be deemend to be the full value of consideration received or accruing as a result of such transfer.

Rem (Practicer) (125 Points)
Replied 28 June 2016

But in the case law which I mentioned before, they taken consideration from cost of construction met by builder in Land owners Share. Also If we transfer the posession of land on completion of building and ready to sale, then capital gain will arise on that day only know.