Capital Gain

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

15 July 2011 Dear sir,
One of our client is selling the land @ 250/sqft coz his land is located at some LOWER ZONE, but along with a condition that if at any time the land zone upgrade than the builder/purchaser have to pay additional sum @ 250/sqft.
Now the Question arises that whether we have to Tax on Rs 250/- or Rs 500/- at the time of Trf.
as Capital gain accrues on the day of Trf itself.
2nd point, if i show sales value @ Rs 250/- only than later on the remaining sum will be Taxed @ 30%.
& if i show Rs500/- as sales value than CG will be taxed even i had received the sum.

i saw too many case laws regarding compulsory Acq. or Compentation received but didn't find the case law in case of Proper Trf of CAP Asset charging capital gain on Receipt Basis.
So please refer the case laws if any in this regard.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 July 2011 The land will be transferred when the sale deed is executed. The value at which the
land is sold or departmental valuation, on higher of the two, stamp duty is required to be paid.
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Before arriving at conclusion certain points are needed to be clarified-

Query-1. When the Sale Deed is being executed? and at what rate the valuation is being taken for the sale deed purpose?
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Query-2. Whether sale deed will contain the above clause of enhancement in the price, if it is being executed now?
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Query -3 Do you think that the builder can be legally made bound to pay the difference ? If yes .. say how ?

If No- Then why you are making such contingent contract with an unreliable person
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Query-4 : It is certain that at any time the valuation of land will definitely go upward. If answer to Q NO 3 is Yes, as it can not be No, then you have a certainty of receiving the payment.
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Possible Solution-
1. Either deal on registered valuation or at Rs 500/-, but sale with a certainty?

"I do not rely upon any one, who once becomes the registered owner, will share with me the enhanced value."

2. Do not sale the full piece of land.
Keep heart of the land with you. The builder will automatically pay you even higher price.

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Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2011 Dear sir,
1. we are mentioning the same clause in the agreement. i.e upgradation value @ Rs250/-
2. Builder & owner of land having good relation & having other agreements too, so that sure that this uncertain sum will get recovered after it becomes certain.
3. Stamp Value is Lower than the Rs 250/-. Builder is purchasing their is chances of enhancing the Value of that Land.
4. That the problem, what amount we will take for stamp duty valuation. i.e Rs 500/- or Rs 250/-.
5. As owner don't wanna to pay CG tax before receiving enhanced sum.
6. Ready to pay CG tax on additional sum but @ 20% not @ 30% as the receipt is in connection with Trf of Capital asset.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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16 July 2011 Option 2 will be better. Some piece of land must be kept by the owner with him and at the time when the "fruits are ripe" the same may be transferred to the builder.

Looking towards the good relationship, the owner may treat, the amount received @ 250/- for unsold land, as advance.

As he is relying upon the builder builder has to rely upon him.

Querist : Anonymous

Querist : Anonymous (Querist)

18 July 2011 Thank you sir,
But till the time this uncertain event comes into certainity, the Fair market value might be greater than Rs 250/- than my CG liability will also increase.
I want to take the benefit at the line i=of the law.
the builder also demand such Piece of land to start his initial level of Construction so he can avoid wealth Tax.

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