Question And Answer
Subject: Taxability of sale of land and consideration in kind
Querist: Prakash Kulkarni
Answered by:
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Date: July 9, 2022
Query asked by Prakash Kulkarni

Assessee is private limited co , engaged in the business of construction and development of real estate project. the co hold two lands one is considered as stock in trade and another land is shown as investment which was purchased eight years bank.

Now assessee co has decided to sold both the lands and accordingly executed the conveyance deed  against the consideration to be received in form of constructed area after 24 months.  The assesee co has also hand over the possession of the said land to the buyer of the land.

consultant of the Purchaser is saying the tax liability in the hands of the co will be at the time when the possession of the constructed area will be given by him and not on the day of execution of registered conveyance deed.

How the income has be recognized for business and profession and also under Capital gains .   whether the opinion of consultant of purchaser is correct.

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As we understand, the consultant of the purchaser is referring to section 45(5A) of the Income-tax Act, 1961 (Act). The same is applicable to individuals and HUF only. The assessee being a Company will be liable to Capital Gains Tax and Business Profits tax in the year of transfer of the said lands, respectively.

As per section 50D of the Act, where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.

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