Capital gains

Tax queries 462 views 2 replies

Deepak Patel

CA Final

136 Points Posted on 25 March 2015

One of our clint (Builder\Developer) in office has entered into an agreement wit the land owner, wherein the land owner will surrender the land in return of 2 luxurious flats (out of 15 flats) built by the developer on the land. As there wil not be a sale deed of 2 flats to the land owner on transfer. After 2years land owner(Owning 2 flats) sell 1 flat, so for calculating capital gains wat wil b the cost of acquisition of the flat. As the owner has received the flat without sale deed.

Replies (2)

CA Pratik Gelda

Chartered Accountant

50 Points Posted on 25 March 2015

Hi Deepak,

As per your facts, two transactions have taken place. One, at the time of entering into development agreement and other at the time of selling of flats. Now, as the land owner has entered into a development agreement with the builder/developer for developing the land, the date of execution of development agreement will be considered as one transfer for computing Capital gains in the hands of land owner and the second event, i.e. at the time of selling of the flats, will be considered as second transfer.

Now, the sale consideration at the time of first transfer will be cost of construction of two flats and thereafter, this sale consideration will be treated as cost of acquisition of the two flats and capital gains will be calculated accordingly.

Hope I have enlighten you on this aspect.

Regards,

CA Pratik Gelda