Capital gain

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This query is : Resolved

Deepak (Querist)

07 March 2012 Facts of the Case:
1) A collaboration agreement was entered into between assessee and Developer to make a multistory building apartment on area 1200 Sq Yds. After demolishing the existing infrastructure.
2) Power of attorney is being given to the developer for demolition, construction, development and completion of a complex containing several flats.
3) Project Duration: 24 Months
4) All Exps. Related to development /construction will be borne by Developer.
5) Rs. 60 Lacs is being given by Developer to the Owners as advance security Deposit at the time of entering into collaboration agreement. ( this is the main amount on which I need your guidance. This the amount which is attracting capital gain tax liability which I want to save)
6) Against work, efforts and costs put in by Developer, He will be entitled to retain and sale 45% of the total constructed Property. (It is reward for his work i.e. in kind. This is the main thing on the basis of that I am trying to save the tax). Means total property will be divided between owner and developer in the ratio of 55:45 respectively.
7) These are terms of Legal collaboration agreement(kind of wrap agreement).What I am planning that A new agreement should be prepared in which it should me mentioned that cost of project will be pay off by owner to the extent of 45% of the total constructed property (Means it will be a FISCAL AGREEMENT for the purpose of saving income tax)
1) Assumption of the Case:
a) Let the existing value of the residential property of the owners is = Rs.50 Lacs
b) Total Cost of Construction/Development work done by Developer is = Rs. 2 Crore
c) Market Value of Total Constructed Property= Rs. 4 Crore
Will any capital gain arise at the time of handing over 45% property to the developer against his development work? Whether Rs. 60 lacs given earlier will attract any capital gain tax Liability?

sudarshan

sudarshan (Expert)

07 March 2012 CAPITAL GAIN WILL ARISE AT THE TIME OF HANDING OVER THE PROPERTY(VACANT LAND). IT WILL BE TREATED AS EXCHANGE FOR THAT CONSIDERATION NEED NOT BE AT PRESENT. YOU MAY REFER TO MAYA SHENOY (TRIBUNAL HYD), SURESH KUMAR D SHAH(TRIBUNAL HYD)

Deepak

Deepak (Querist)

15 March 2012 Dear sir
Agar Agreement me possession Developer ko de diya gaya ho to 60 lakh par capital gain calculate hoga. par asa koi funda hai ki tax bach sake.........

sudarshan

sudarshan (Expert)

15 March 2012 as per 53A of TPACT(section 2(47) this cannot be avoided. You may try other options as converting land into stock in trade and postpone capital gains till sale.

Deepak

Deepak (Querist)

16 March 2012 Dear Sir
Agar Collaboration agreement me possession dene ki koi bat nahi ho or normal collaboration agreement ho to capital gain calculate nahi hoga na?

sudarshan

sudarshan (Expert)

16 March 2012 when there is handing over of property in pursuance of agreement/contract it will be transfer as per Sec 53A of TP Act. capital gain will arise in case of collaboration of joint venture or joint development whether power is given to developer or not.

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