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MCQ SELF CHALLENGE # 0059 ON TAXABILITY ON JOINT DEVELOPMENT AGREEMENT (JDA)

Taxability on Joint Development Agreement (JDA)

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As the top tax consultant in Gurgaon, we have here the Next post of #MCQ on concept-based practical professional knowledge on the concept of taxability in case of joint development agreements in a unique manner to be self-answered by participants. The detailed answers to these MCQs shall be posted the next day for the self-assessment of the participants.

MCQ 59.1: Mr. X enters into a joint development agreement with ABC Builders. Mr. X handed over the possession of the plot to ABC Builders on 01.05.2017. ABC Builders will pay a nonrefundable amount of Rs 60,00,000 to Mr.X on 01.05.2017. ABC builders will construct 10 units on the plot of land and will give 6 units to Mr. X. All the units will be completed on 30.06.2019 and a completion certificate shall also be obtained from a competent authority. The stamp duty value of the plot as of 01.05.2017 is Rs 2 crores and on 30.06.2019 stamp duty value of each flat was Rs 45 lakhs. What will be the value of the sale consideration in the hands of Mr.X?

A) 3.30.00.000.

8) 2,70,00,000.

C) 2,00,00,000.

D) 2.60.00.000.

MCQ 59.2: What if in the above question, part completion certificate for 2 units is obtained only?

A) 3,30,00,000.

B) 2.70,00,000.

C) 2,00,00,000.

D) 2.60.00.000.

Answer MCQ Self Challenge # 0059

This post of MCQ is on the understanding of income tax provisions in case of transfer of land under the joint development agreement.

Answer to MCQ 59.1: A) 3.30,00,000.

Answer to MCQ 59.2: A) 3.30.00.000.

Practical Analysis for MCQ 59.1 & 59.2:

1. Section 45(5A) deals with the transfer of property in case of joint development agreements which is as follows-

2. Owner is an individual or a Hindu undivided Family

3 Transfer of capital assets to a builder under a joint development agreement

4. Capital gain shall be chargeable to tax in the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority.

5. Stamp duty value of his share on the date of issue of said certificate Plus the consideration received in cash shall be deemed to be the sales consideration

6. Provisions not to apply where the assessee transfers his share in the project on or before the date of issue of said certificate of completion.

Based on the above analysis, the correct answer MCQ 59.1: A) Rs 3.30.00.000(45 lakhs 6+ Rs 60 Lakhs) and Correct answer MCQ 59.2: A) RS 3.30,00,000 notwithstanding that the certificate is obtained only for 2 units as provisions will also apply in case certificate obtained for part completion of project.

(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as a professional opinion: you can definitely have your own opinion.)

Sincere Regards!

CA Sanjay Kumar Agrawal

Mobile: 9810116321