Development agreement, cost of construction

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Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2016 In case of development agreements, we sometimes have to use the cost of construction of the flat as the consideration.
In this case , the cost of construction as provided by the builder is , 957 @ Rs1,200 , but as per the ready reckoner , the rate for construction is @ Rs1,950.
Both of the above values are going to be more than the stamp duty value of the development agreement.

Since the difference is of 750, should I consider 1950 as value (ready recknoer value) or the value as certified the builder. The difference of amount is a bit high and is raising some doubts in my mind, it can raise doubts in mind of AO also. Assessee is willing to pay higher tax amount.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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27 July 2016 In case of development agreement, what you transfer is certain per cent of land to the developer by giving GPA. It amounts to transfer as per definition u/s 2(47). What you transfer is just land and not the superstructure that the developer may or may not construct. The consideration for land transferred through 'power' is the stamp value of land on GPA date. Better you consult a chartered accountant with strong knowledge in income tax matters.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2016 Thank you very much for your reply sir.
I wish to add that there are some methods of computing the sales consideration and this value shall not be less than the stamp duty value of the land (owing to S.50D , read with S.50C)
Thanks a lot for your time and reply sir.