capital gain taxation

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Aishwarya (Querist)

08 November 2016 Dear all, I have an query to be resolved, one of our client has entered in to a JDA agreement for building some 10 villas in the vacant land held by him. I wanted to know whether the villas being constructed on JDA falls under the definition of capital asset or should we consider it as stock in trade please guide me Regards Aishwarya

Amol S Joglekar

Amol S Joglekar (Expert)

08 November 2016 vacant land is the capital asset.
For transfer of land, your client is getting 10 Villas.

Aishwarya

Aishwarya (Querist)

08 November 2016 Exactly sir as per the agreement 60% share of land is of the builder and another 40% is land owner in consideration for sale of land the builder is constructing villas for the land owner. Again the land owner is intending to sell the villas. I wanted know whether those villas is a capital asset or stock in trade to the land owner

Amol S Joglekar

Amol S Joglekar (Expert)

08 November 2016 You appear to be from Bengaluru side of our country, where this sort of 60:40 confusion is created in the minds of assessee by some of the practitioneers. Ok?
See try to understand in simple manner. This 60:40 is nothing but MODE of PAYMENT of consideration.
What your client is transferring through JDA is "100% land" (capital asset) in consideration of construction of 10 villas on 40 % of the land.
01. The first instance of Capital Gain arises on the date of JDA. Bengaluru High Court has given judgement in such cases that the full value of consideration of transfer of 100% of land through JDA = FMV of the cost of construction of 10 Villas along with 40% share of land.
02. When these Villas are sold by the land owner, the next instance of capital gain will arise. The cost of acquisition of these villas would be the FMV taken for computing the full value of consideration as above in step 01.
Please go one by one and come back for query if any

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