Jda

I made a JDA with developers in 2010 for land development not for construction of building.Share of land owner & land developers was decided as 60% & 40% respectivaly in JDA but area was decided because plan approval was pending at that time.Finaly plan approvaal was made in 2014-15 & supplimentary JDA was executed to allocate the area with the same sharing percentage.Possession of land was given at the time of original JDA.Sale of first site made in current year(i.e.2019-20)
Figures to be considered to the purpose of calculation :-
cost of land :-Rs.100 lacs
Development charges :-50 lacs
land owner & developers shares is 60% & 40% respectivaly.
Guideline value at the time of original JDA :- 150 lacs
Guideline value at the time of supplimentary JDA :- 175 lacs
Number of equal site :- 40
Selling price of a site today :-7.50 lacs each.

Now i have following questions :-

1.Whether ammendment in section 45(1A) is applicable to land developers also.
2.What will be the cost of land to land owner for the purpose of capital gains .Whether capital gain will calculated only on land owner shares at the time of JDA ?
3.If land owner sale his share of developed site then how will he account development charges incurred on land.
4.What will be the cost of land to developers for accounting purpose.
Need response urgently.

Asked 6 years ago in Income Tax

Dear Sir,

Hope you are doing well !!

- No, 45(1A) is not applicable to land developers.

-Land owner has to pay capital gain tax both the times (I.e. at the time of receipt of completion certificate and at the time of sale of that flat).

Capital gain will be taxable when the completion certificate will be issued.

Capital gain at the time of sale of any of the flat will be calculated by deducting stamp duty value of the flat (taken at the time of completion) from actual sale consideration.Cost of acquisition will be your share in land or FMV of land if purchased by ancestors before 2001.

Capital gain at the time of completion certificate would be calculated by deducting total land cost from the stamp duty value/market value of flat received by land owner.

-There are two method of accounting for cost of land for developers:

i). Completed contract method (as per AS-9 “Revenue recognition”):
ii) Percentage of completion method (as per AS-7 “Construction contacts”):

We can discuss further if you have any doubt.

Payal Chhajed

CA, Mumbai

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I think you are talking about section 45(5A) of the income tax act which governs Joint developer agreement and it only covers Joint developer agreement for the construction of residential complex and your transaction wont be covered.

For the calculation of capital gain cost of land would be the cost at which land was purchased by the owner and if it has been purchased before 01.04.2001 then its FMV on 01.04.2001 would be its cost of acquisition.

I didnt get your second question in point 2.

Once he pays capital gain on JDA and then he sells his part of land such development charges would be included as cost.

Cost of the land for developers would be value of services provided by them.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo

CA, Jaipur

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