Taxability
This query is : Resolved
08 April 2018
ABC pvt. Ltd entered into a joint venture agreement with a private party say mohan to construct apartments in mohan'S land and then share profit in the ration of 40% and 60% for mohan and ABC pvt ltd respectively.
on FY 14-15 they had turnover of 1.5 crore from transfer of apartment but the company had not paid any single amount to mohan..
qts
1) who had tax liability ?
2)is mohan liable for capItal gain tax ?
3) compute the tax ?
on FY 14-15 they had turnover of 1.5 crore from transfer of apartment but the company had not paid any single amount to mohan..
qts
1) who had tax liability ?
2)is mohan liable for capItal gain tax ?
3) compute the tax ?
08 April 2018
1. Company is liable to pay tax.
2. No
3. Whose tax laibility???
08 April 2018
ignore computation since more detail required
08 April 2018
ca rashmi please clarify, why mohan is not liable since transfer took place and capital gain arises on transfer ??
26 July 2025
Let's break down the taxability of this joint venture scenario:
---
### Facts Recap:
* ABC Pvt Ltd and Mohan enter JV to construct apartments on Mohan's land.
* Profit sharing ratio: Mohan 40%, ABC Pvt Ltd 60%.
* FY 2014-15 turnover: Rs. 1.5 crore from apartment sales.
* ABC Pvt Ltd has not paid anything to Mohan yet.
---
### 1) **Who has the tax liability?**
* The entity which **actually transfers/sells the apartments** is liable to pay tax on the sale proceeds.
* Since **ABC Pvt Ltd transferred the apartments** and booked the turnover, it is primarily liable for tax on the sale consideration.
* Mohan is not liable for tax on the sale of apartments because he did not transfer them; he only contributed land.
---
### 2) **Is Mohan liable for Capital Gains Tax?**
* **No**, Mohan is not liable for capital gains tax because he did not sell the apartments himself.
* However, Mohan is entitled to share of profit as per the JV agreement.
* When Mohan **receives his share of profit** (in cash or kind), it will be taxable as **income from other sources** or possibly capital gains depending on the nature of receipt.
* Mohan’s tax liability arises when he receives his share of income/profit from the joint venture.
---
### 3) **Compute the tax?**
* To compute tax properly, details are needed:
* Cost of acquisition and date of Mohan’s land.
* Expenses incurred for construction and sale.
* Actual profit realized and share payable to Mohan.
* Whether the joint venture is treated as a partnership or ABC Pvt Ltd is a contractor.
* However, from the company’s perspective:
* ABC Pvt Ltd will pay tax on the capital gains from selling apartments.
* The gain would be **sale consideration minus cost of land + construction costs + other expenses**.
* Mohan will pay tax when he receives his share (40%) of profits.
---
### Additional points:
* If ABC Pvt Ltd has not paid Mohan his share yet, it is just a receivable for Mohan.
* Mohan should report the profit/share received from JV in the year he actually receives it.
* ABC Pvt Ltd’s tax liability arises on the full turnover from sales, assuming the apartments were sold in its name.
---
**Summary:**
| Question | Answer |
| ------------------------------ | --------------------------------------------------- |
| Tax liability on sale | ABC Pvt Ltd liable on turnover from sales |
| Mohan liable for capital gains | No, not on sale; liable on share of profit received |
| Tax computation | Needs detailed cost, expenses, and profit data |
---
If you want, I can help you draft a detailed tax computation once you share the relevant cost and expense details! Would you like that?
---
### Facts Recap:
* ABC Pvt Ltd and Mohan enter JV to construct apartments on Mohan's land.
* Profit sharing ratio: Mohan 40%, ABC Pvt Ltd 60%.
* FY 2014-15 turnover: Rs. 1.5 crore from apartment sales.
* ABC Pvt Ltd has not paid anything to Mohan yet.
---
### 1) **Who has the tax liability?**
* The entity which **actually transfers/sells the apartments** is liable to pay tax on the sale proceeds.
* Since **ABC Pvt Ltd transferred the apartments** and booked the turnover, it is primarily liable for tax on the sale consideration.
* Mohan is not liable for tax on the sale of apartments because he did not transfer them; he only contributed land.
---
### 2) **Is Mohan liable for Capital Gains Tax?**
* **No**, Mohan is not liable for capital gains tax because he did not sell the apartments himself.
* However, Mohan is entitled to share of profit as per the JV agreement.
* When Mohan **receives his share of profit** (in cash or kind), it will be taxable as **income from other sources** or possibly capital gains depending on the nature of receipt.
* Mohan’s tax liability arises when he receives his share of income/profit from the joint venture.
---
### 3) **Compute the tax?**
* To compute tax properly, details are needed:
* Cost of acquisition and date of Mohan’s land.
* Expenses incurred for construction and sale.
* Actual profit realized and share payable to Mohan.
* Whether the joint venture is treated as a partnership or ABC Pvt Ltd is a contractor.
* However, from the company’s perspective:
* ABC Pvt Ltd will pay tax on the capital gains from selling apartments.
* The gain would be **sale consideration minus cost of land + construction costs + other expenses**.
* Mohan will pay tax when he receives his share (40%) of profits.
---
### Additional points:
* If ABC Pvt Ltd has not paid Mohan his share yet, it is just a receivable for Mohan.
* Mohan should report the profit/share received from JV in the year he actually receives it.
* ABC Pvt Ltd’s tax liability arises on the full turnover from sales, assuming the apartments were sold in its name.
---
**Summary:**
| Question | Answer |
| ------------------------------ | --------------------------------------------------- |
| Tax liability on sale | ABC Pvt Ltd liable on turnover from sales |
| Mohan liable for capital gains | No, not on sale; liable on share of profit received |
| Tax computation | Needs detailed cost, expenses, and profit data |
---
If you want, I can help you draft a detailed tax computation once you share the relevant cost and expense details! Would you like that?
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