Agreement to sell shall be treated as sale

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HUZAIFA HUSSAIN (Querist)
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02 December 2009 Sir / Experts

My assessee (being, builders & Contractors) had purchased a land in 2007 on sale agreement cum GPA. Now in 2009 they sold the land as GPA Holder. Please tell me how to show the same in Income TAx. To show it as a Business income or capital gain.
Further is agreement to sell cum GPA can be considered as sale

Pl its urgent.

Thanks in anticipation.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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03 December 2009 It can be shown as business income since the the assessee is in the business of builders and developers. But this view is not free from doubt since the assessee sold out land alone that too after a period of two years.

The date of agreement to sell cum GPA can be taken as date of sale for the limited purpose of computing capital gains. Little more elaboration is given hereunder.

In the case, having regard to the terms of agreement and the irrevocable GPA executed pursuant to the agreement, the execution of GPA shall be regarded as the transaction involving the allowing of the possession of land to be taken in part performance of the contract and therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA.

Once it is held that the transaction of the nature referred to in sub-clause (v) of section 2(47) had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively.

HUZAIFA HUSSAIN

HUZAIFA HUSSAIN (Querist)
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03 December 2009 Thank you sir for ur valuable advise

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