Capital contribution of Land into SPV for Specific project attracts Income Tax & why ?

Save Share

This query is : Resolved

Challa.Praveen kumar (Querist)
Follow

28 February 2026 Need Tax opinion,Our business model is to buy land, convert it to non Agricultural land, develop a solar park by taking approval from govt and sell the full project(EPC+ land) to different customers, we treat such land as inventory. We completed 1 solar park earlier. For our 2nd project, we bought land but due to operational issues we couldn’t start EPC and now we are planing to setup SPV and transfer this land including appovals taken as a capital. Want to understand the Tax implications on this transfer. 1.Whether this transfer is Taxable ? if yes then under what sec ? 2.If Taxable what should be the sale consideration (We receive shares in the SPV)? 3. Can this treated as slump sale or demerger ?

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
Follow

28 February 2026 The transfer of land (held as inventory) into an SPV in exchange for shares is a taxable business transaction. You will likely be taxed on the difference between your acquisition/development cost and the Fair Market Value (or Stamp Duty Value) of the land at the time of transfer. Slump sale benefits are difficult to claim if the "undertaking" is not yet operational.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now