Real Estate Transaction Structuring with Power of attorney & Beneficial Ownership

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This discussion addresses a complex real estate transaction where clients' investment is in land titled under third parties. The proposed structure involves creating a partnership firm to act as an agent, empowered by registered Powers of Attorney from the landowners. This firm would manage sales, collect proceeds, deduct commission, and remit the balance to the landowners, with capital gains tax handled by the title holders. The primary aim is to give clients control over sales and payments without impacting tax obligations or creating risks of the firm being taxed on gross receipts, provided a clear agency agreement is in place.

Chartered Accountant

Chartered Accountant (Querist)

09 April 2025 URGENT!!!!
I have 4 clients who together have invested in a Real estate colony (Converted a large agricultural land to residential plots) , but the title deeds are in the names of 4 third parties. My clients want to control the sale process and receive payments directly.

Plan: Create a partnership firm (owned by clients) and take registered Power of attorneys from the land owners. The firm will act as an agent, sell the land, collect proceeds in its own bank account, deduct its commission, and remit the balance to the third parties at year-end.
Capital gains tax will be deposited in the names of the third-party title holders only.

Example: If a plot is sold for ₹100, the firm collects the full ₹100, deducts ₹10 as commission, and remits ₹90 to the land owner. This is repeated for all plots, and settlements are done annually i.e Rs 90 will be remitted back in third party's bank account.
The goal here is not tax evasion but just to take the token amounts and sale proceeds in client's account so that they are not dependent on third parties to collect the money.

Is this structure valid from Income Tax and compliance perspective? Any risk of the firm being taxed on the gross receipts?