Capital gain on collaboration agreement

1619 views 2 replies

Shivish Verma

C A

376 Points Posted on 21 March 2014

Sir,

One of my client had a house property. This property had a ground floor only. A builder approached him and entered into a collaboration agreement on 01.08.2013, and gave Rs. 30.00 lacs and offered to construct two more floors. In lieu of this, he want to have first floor with him and rest of the floors i.e. ground and second floor will be with my client.

However, construction will not be expected to be completed on 31.03.2014

What will be the taxability in my client’s hand for the F.y. 2013-14 ( A.y. 2014-15)?

Please revert, Its urgent

Replies (2)

Guest

The act of giving possession of an immovable property in part performance of a contract is treated as ‘transfer’ for the purposes of capital gains. Collaboration is a deal between the Landowner & the Builder where the Owner appoints a Builder to develop, construct and build a new building on his plot of land/ existing building by entering into a Collaboration Agreement.

As per

[2007] 164 TAXMAN 108 (AAR - NEW DELHI)

AUTHORITY FOR ADVANCE RULINGS, NEW DELHI

Jasbir Singh Sarkaria, In re.

JUSTICE P.V. REDDI, CHAIRMAN

AND A. SINHA, MEMBER

A.A.R. NO. 724 OF 2006

AUGUST 30, 2007

In the instant case, having regard to the terms of two agreements and the irrevocable GPA executed pursuant to the agreement, the execution of GPA shall be regarded as the ‘transaction involving the allowing of the possession’ of land to be taken in part performance of the contract and, therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA.

So, in my view, the transaction is taxable in current year , if possession is given.

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