Joint development agreement

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2016 I have an issue in relation to the capital gain in which I got enmeshed.

The issue is- I have contracted with a builder under JDA to construct the flats and builder will keep 2 flats out of 4. Now the question arises here to calculate Capital Gain.

To comply with the rules in relation to the capital gain, I have calculated capital gain like this---- Sale Consideration (full Consideration) 8500000/- (Given)

Less: COA (Indexed) 3000000/-

Capital Gain 4500000/-

Whether any exemption available under section 54 if yes then how can I save my

tax to claim exemption u/s 54 for construction of two flats i.e construction

done by builder on my behalf.

If is there any other way, please inform me.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 August 2016 Hope this is longterm capital asset, as you mentioned indexed cost of acquisition. Out of two flats one may be taken for exemption subject to conditions u/s 54. How do you arrive at Rs. 85 lakhs full value of consideration.

Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2016 8500000/- is combination of two consideration i.e. sale value paid by cheque and total cost incurred for constructing the two flats on my behalf.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 August 2016 What you are transferred was residential property and not the flats constructed by the developer. How can you take the cost of the flats as consideration, when the construction may complete after one or two of the transaction? The capital gains has to be computed on the transfer taken place immediate after the handing over the possession of the land.

This is an arbitrary practice. This practice in vogue, but not correct in true spirit of IT Law. Please go ahead. IT Authorities also accepting.

Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2016 There is also a query which I forgot to include in the earlier query.
Whether demolition cost incurred by the builder includes in sale considerataion.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 August 2016 If you want to claim deduction u/s 54, you need transfer the residential property and not the open land after demolition of the property. In such case, the cost of demolition or its scrap value shall not belong to you.

Querist : Anonymous

Querist : Anonymous (Querist)

04 August 2016 OK that means after execution of collaboration agreement, the residential house gets automatically transferred to the builder and whatever he pays me will be treated as sale consideration and when he gives me the constructed flats then I can claim exemption u/s 54.
Please let me know if I am wrong at this point of view.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 August 2016 Yes. It is always better to take a professional advice personally. Your transaction is involving a few lakhs of rupees tax outlay.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 August 2016 Yes. It is always better to take a professional advice personally. Your transaction is involving a few lakhs of rupees tax outlay.

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Z (Expert)
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06 August 2016 Exemption may be available u/s 54F. Whatever Sir has said is correct but there are many factors which requires consideration. I do not think its possible to opine properly without reading the agreement. You may mail me the agreement and the exact facts of the case.
[You may remove the personal information from the docs.]
mail; prateek63@yahoo.co.in