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ADISEKHARA REDDY BALAMU (PARTNER)     18 April 2013

Date of purchase - long term capital gain

Dear Sir

My client owns a self acquired land, who entered into a Joint Development Agreement with a developer.  The details of the same is produced below.

 

Date of purchase of land – 14.05.1992

 Date of Joint Development Agreement – 25.06.2008

 Date of Land conversion – 27.07.2009

 Date of Layout approval – 18.05.2010

 Date of Allocation Agreement – 18.06.2010

 Date of Villa Plan Approval – 21.08.2010

Based on recent Karnataka High Court Judgements, one has to pay taxes on LTCG or STCG in the Financial Year in which he has entered into Joint Development Agreement.   

In my clients case, land is purchased in 1992, Joint Development Agreement entered in 2008 and Layout Approval is received in 2010.

As per the JDA, my clinet shall convey 64% of the his land  and in consideration, the developer delivers construction of 10757 sqft of super built up area. (i.e. roughly 4 nos villas).

The income tax department has accepted filing of LTCG araised on account of JDA, in the financial year 2010, in which the developer got the layout approval i.e. (18.05.2010)

The construction of 2 nos villas is goint to be completed and posession will be taken by 31.05.2013 and The construction of balance 2 nos villas is yet to be started.

Now my question is if the my client want to sell 2 nos villas after 01.06.2013, whether the period for capital gains be considered as 

1) Date of Layout approval 18.05.2010 (FY 2010-11 the year in which LTCG Tax is paid on account of JDA) till 01.06.2013 - the peirod will be more than 36 months which results in LTCG.

2) If we take date of posession, 31.05.2013 - the period will be less than 36 months which results in STCG.

Please comment whether the assessee should avail the date of layout approval or date of posession.

Regards

Adisekhara Reddy

 

 

 

 

 

 

 

 



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