Dear Members,
I have a situation. Mr X owns a NA land (Puchased in Oct 2013). Mr. X is proceeding for development agreement with Mr. Y ( and his development Firm). Estimated time for completion of construction will be 12-15 months since inception of construction. In return Mr. X gets 40% of the flats to be constructed. Also for assurity of deal Mr. X gets some cash money as deposit, which he needs to return to Mr. Y at the end of contract. Now the questions are
1. What type of tax liability do Mr. X has?
2. Is Mr. X liable to pay tax now (when he enters development agreement and POA with Mr. Y) or when he gets pssession back of 40% constructed space or when Mr. X sells this 40% space to earn profit?
3. In the mean time of during construction, Mr. Y plans to sell off his 60% ( as under construction) share to generate fund to complete construction. Due to this if the answer of question 1 and 2 changes, what will it be?
4. If the tax implication under short term capital gain arises, then is ther any way that Mr. X should alter agreement in a way that it dont looks as direct capital gain case?
5. What care should be taken while drafting agreement and POA?
CAclubindia
