Capital gain tax in joint development agreement

Dear Sir,

   Here is my problem in understanding capital gains under JDU(Joint Development Agreement),

      I have given my property for development on 14.01.2013, which is of 2.15 Acres to private Infra Company which in turn I got 66667.5(31%) Sqft of Construction i.e., total salable built up area is 215015 Sqft with 5 Floors and 161 Flats out of which I got 50 Flats.
IT Department (AC) has surveyed the premises and ordered to pay capital gain for the consideration received (800/sft for 66667.5) from the date of agreement with interest till now. 
If it is deemed as Consideration is received as 800/sft(Construction Cost) from the date of agreement,  it is only received in the form of BRICK & MORTOR that to by phase wise than income by cash,  How far this order by AC of IT is justified.
Facts:
?	I have sold some of my flats (8) on 2014, 2015& 2016 and audited the income, paid the IT as well.
?	Irrevocable GPA is executed in the name of builder on his share.
Please guide me in this regard. Your suggestions at this crisis are highly valuable to me.

Regards,
Sarath Reddy.
Asked 9 months ago in Capital Gains Tax from Chennai, Tamil Nadu
In Budget 2016, clarity was expected on the long term capital gains in the hands of the owners in JDAs but unfortunately this was not done. There are conflicting judicial decisions on this issue. As most of the owners are individuals and unorganized, most of the JDAs are drafted to the advantage of the Developers, with absolute rights granted under GPAs, thus invoking the incidence of capital gains in the hands of the owners the moment the agreement is signed. 

The agreements with the builder need to be studied in detail to determine the time at which the transfer takes place. Presently I am also dealing with similar case. You may contact me if necessary.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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This query is shown as pending answer in my account. I am now repeating my answer given earlier.

In Budget 2016, clarity was expected on the long term capital gains in the hands of the owners in JDAs but unfortunately this was not done. There are conflicting judicial decisions on this issue. As most of the owners are individuals and unorganized, most of the JDAs are drafted to the advantage of the Developers, with absolute rights granted under GPAs, thus invoking the incidence of capital gains in the hands of the owners the moment the agreement is signed. 

The agreements with the builder need to be studied in detail to determine the time at which the transfer takes place. Presently I am also dealing with similar case. You may contact me if necessary.
B Vijaya Kumar
CA, Hyderabad
290 Answers
5.0 on 5.0
  Talk to B Vijaya Kumar
Madam we need to study the development agreement to suggest you the exact answer. You can send the same on our mail ID modani005@gmail.com.

Also we need to look at the order copy from department and what statement has been given at the time of survey.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Its a highly litigious issue. The incidence of capital gain taxes under these scenarios depends upon the drafting of JDA and conduct of the parties. 

However it generally takes place in the year in which the JDA is signed. Apparently case seems to be weak.
Further please let us know how Rs. 800/sq ft was calculated. Ideally it should be cost of construction per sq/ft.

We will need JDA, GPA and AO order to properly guide you. 
Abhishek Dugar
CA, Mumbai
766 Answers
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Hello Sir,

Considering the facts provided in your case, it appears to be a critical & complicated matter. I would advise you to hire a professional in your city to handle your case as he will have to go through all the documentations, find out points which are beneficial to you or are in your favour and then fight the case out with the Income Tax Authorities.

So please get in touch with a Locally Based professional with all the necessary documentation.

Trust this clarifies your query.

Feel Free to get back/ call for any further clarifications.

Thanking You.

Regards,
CA Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP. 
Rohit R Sharma
CA, Mumbai
719 Answers
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