Introduction

Under the existing provisions of Section 45, capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. The definition of Transfer inter alia, includes any arrangement of transaction where any rights are handed over in execution of part performance of contract, even though the legal title has not been transferred.

Section 45(5A)

Capital gain on Land and Building under Joint Development Agreement (Finance Act, 2017)

Example:

Mr.X purchased a residential plot on 01/01/1998 for Rs.50,00,000. FMV of plot as on 01/04/2001 is Rs.65,00,000. Alpha builder enters into a Development Agreement with Mr.X on 01/05/2018 on the following terms and conditions:

• Mr.X will handover the possession of plot to Alpha Builders on 01/05/2018
• Alpha Builders will pay cheque of Rs.60,00,000 to Mr.X on 01/05/2018
• Alpha Builders will construct 10 residential units on the plot of land and will give 6 units to Mr.X. The 10 units shall be completed by 30/06/2020 and on that date 6
• The stamp duty value of plot as on 01/05/2018 is 2 crores
• The stamp duty value of each flat 30/06/2020 is 45 lakhs

Case 1: The project completion certificate is issued by the competent authority on 30/06/2018. 6 units are handed over to Mr.X on 30/06/2020

Case 1: The project completion certificate is issued by competent authority on 30/04/2021 and on that date the Stamp Duty of each flat is 50 lakhs. 6 units are handed over to Mr.X on 30/04/2021

Answer :

• There is a TRANSFER on 01/05/2018 in hands of Mr.X since he has given the possession of residential plot pursuant to Development Agreement.
• However as per Section 45(5A) introduced by Finance Act, 2017 the capital gains shall not be taxable in PY 2018-19 but shall be taxable in the PY in which certification of completion is issued by competent Authority. Thus, capital gains shall be taxable
• Section 45(5A) is applicable since assessee is an individual
• Holding Period of residential plot – 01/01/1998 to 30/04/2018. Hence long term
• Cost of Acquisition – As per Section 55, COA of plot is 50 lakhs or FMV on 01/04/2001 (65 lakhs) whichever is higher. Therefore 65 lakhs
• Sale consideration u/s 45(5A) = SDV on the date of issue of completion certificate of his share in land/building in project plus consideration received in cash

Capital Gains shall be worked out as under:

Case 1: In PY 31/03/2021, when completion certificate is issued by Competent Authority

Case 1: In PY 31/03/2022, when completion certificate is issued by Competent Authority

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