Messages

1.   In the context of entering into JDA if we are unable to determine the exact / approximate amount of 'Revenue' to be received vide JDA can it be said that consideration is "not ascertainable or cannot be determined"? Further will the consideration still be "not ascertainable or cannot be determined" in case of JDA's having conditions such as
(i)   Cancellation of JDA due to non-performance / Short-performance of Developer
(ii)   Substitution of Revenue to Area sharing Model, and / or Substitution of Area sharing Model to Revenue Model, due to failure to sell flats by Builder after construction or any other reason, irrespective of the fact that the estimated built-up area / amount to be received from the project is derivable due to future events like plan sanction, Launch price, any other reason etc and not @ time of entering into of JDA

2.   Will the provisions of this section survive  (i.e. can it be said that consideration is not determinate / not ascertainable) on account of the following future event(s), which may / may not take place in the year in which JDA is entered into
(a)   Getting Approved Plan sanction
(b)   Getting Modified Plan sanction
(c)   Getting Final Plan sanction
(d)   Fixing of prices for each unit of apartment
(e)   Built-up area is ready
(f)   Agreement is entered into with flat-owners
(g)   Actual amount is received
(h)   Final conveyance is made in favour of flat owners

3.   How will the Fair Market Value of the asset to be transferred be derived under the act, on the date of entering into JDA?

4.   What are the implications under the act if the amount actually accruing / to be received on a future date is not equal to the Fair market value of land transferred, considering the following cases

(i)   Actual consideration received / accruing as the result of transfer is lesser than the FMV of asset transferred / asset received

(ii)   Actual consideration received / accruing as the result of transfer is greater than the FMV of asset transferred / asset received

In case (i) can the assessees challenge such difference and pay tax only on the actual amount received or accrued. Ignoring the fiction created by law deeming FMV as consideration accrued or receiving as a result of transfer. If so under which provisions. i.e. Defeating the very purpose of the section

In case (ii) can the Department challenge such difference and levy tax only on the actual amount received or accrued. Ignoring the fiction created by law deeming FMV as consideration accrued or receiving as a result of transfer. If so under which provisions. i.e. Defeating the very purpose of the section

Is this position the same under the following provisions. If so considering (i) and (ii), what is the current status in light of following provisions
•   4th Proviso to Sec. 48
•   Section 45(1A)
•   Section 45(2)
•   Section 45(3)
•   Section 45(4)
•   Section 46(2)

5.   What will be the position, if any retrospective / clarificatory amendments / explanations are being made incorporating cases (i) and / or (ii) referred to in 4?

Following are facts

1. LAND - BUSINESS ASSET (STOCK-IN-TRADE) 01.04.13
2. JDA ENTERED & POSSESSION GIVEN - 30.06.13
3. ACTUAL SALE OF FLATS (BUILT-UP AREA + UNDIVIDED SHARE IN LAND) - 2015-16

Queires:-

Business Income would be computed upon:
1. Does entering JDA, giving possession and all rights to builder result in accrual / reciept of Income under the IT, act
2. Or actual sale of Built-up area recieved / share of sales as agreed in JDA

Whether Accounting standard will be applicable or General law under Transfer of property act  - (Sec.53 A) will apply

Dear all,
Whether interest payment on bank loan will be eligible for exemption in the following example, assuming Section 54 case and not 54F:

Longterm capital gain:- 20 lakhs
House construction cost :-18 lakhs
Interest paid on housing loan upto date of filing return of Income:- 1.5 laks

Would the exemption u/s 54 be equal to
View 1 - 18 lakhs
View 2 - 18 + 1.5 = 19.5 lakhs
View 3 - 18 (+ 1.5 = 19.5 lakhs - 54 exemption and / or deduction u/s24 for housing loan interest)

Give me your email will send an article and kar HC case-law that will surely help you out in this regard

Scenario 1 - A person introduces his land as capital contribution to the firm, can the amount payable towards such capital be claimed as 'debt owed' by the firm for wealth tax purposes...

Scenario 2 - Or is it possible to transfer land to the firm not as capital contribution, and hence can the amount payable be regarded as debtowed by the firm for wealth tax purposes

Kerala HC has in the case of Commissioner of Income-tax, Cochin v. V.R. Desai held that exemption wouldnt be available if amount towards repayment of loan used for the purpose of construction arent repaid from consideration receivable from the firm.

My concern is whether an assessee can claim cost of construction incurred prior to Transfer of capital asset considering the fact that no amount is received from the firm which has been used to repay loan taken for construction
Awaiting reply

The facts of the case are as follows:

- Land (being capital asset of the assessee) has been transfered to a partnership firm in which the assessee is a partner.Consideration has been decided however, no amount is received for the same - April 2011 as land is invested as the assessee's capital contribution. No withdrawl is permitted

- Residential House (incl land) purchased  - May 2011 - same will be demolished & reconstructed afresh - Bank loan is used for the same

Further would there be any tax effect if such investment in firm was made on or after June 2011

Would the exemption be available if such loan is repaid by way of

(i) own funds
(ii) Drawings from such partnership firm
(iii) both

However, the present case Equity Shares are received from the Company in lieu for surrendering Share Warrants.Still would the same stand hold good.
There is no reduction in face value of warrants nor there is any extinguishment of rights in warrants(forfieture due to non-payment)
Can the Market value (Quoted rate in RSE) of Equity shares be taken as full value of consideration - i.e. can the event of conversion be considered exchange

This Karnataka high court judgement seems to have held to the contrary

Would Exemption u/s 54 / 54F be available w.r.t the following amounts prior to Transfer of Eligible capital Asset(s), (assuming all other conditions  like completion of construction within 3 years etc have been fulfilled)

1. Cost of Land - (i) with one year before transfer (ii) prior to one year before transfer

2. Construction expenses incurred (i) with one year before transfer (ii) prior to one year before transfer

Further, would the exemption be available in cases where, the above expenses were incurred prior to transfer out of borrowed funds [ (i) with one year before transfer (ii) prior to one year before transfer], and consideration on transfer / other amounts are used to repay such loan(s) - Would this amount utilisation of amount(s) for the purpose of construction of House

To add Further,
Would the event of conversion of warrant(s) to equity share(s) amount to transfer for Capital Gains purposes;

Further would like to understand the period of holding applicable  to classify warrant(s) as a STCA / LTCA (12 months or 36 months) .

Dear all,
             Wanted your views regarding availability of Exemption u/s 10(38) upon transfer of Share warrants

Thanks in advance

Does INSTRUCTION NO. 8/2010 [F.NO. 275/73/2009-IT(B)], DATED 8-12-2010 have any effect on the dis-allowances that would be made u/s 40(a) of the Income tax act.

Under sec. 50 actual sale consideration will be used to find if any capital gain is arising.
Once this test it met, section 50C value for full value of consideration will be substituted and the Capital Gains will increase accordingly.
However, if if there is no requirement of computing Capital Gains u/s 50, the provisions of sec.50C can never be made applicable to such cases.

["45[Special provision for computation of capital gains in case of depreciable assets.]

Section 50C can be made applicable to Depreciable assets, as Sec.50C doesnot make any specific exception that its provisions cannot be made applicable to Depreciable assets. Section provides for deeeming fiction according to which if
"the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed 54[or assessable] by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed 54[or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
deeming fictions created by law have to be interpreted strictly - Is a Rule of Interpretation followed and the same has been upheld and observed in many decisions.

Heading of section50 is as follows:

"45[Special provision for computation of capital gains in case of depreciable assets.
Section provides for a specific mode of computation in case of depreciable assets, it provides for modification of various items that are considered for Computation of Capital Gains. There is no exception in sec.50 that sec.50C will not be applicable to cases where sec.50 would be applicable.

In my view section 50C can be made applicable only when sec.50 is applicable, If no computation of capital Gains (either u/s 50 or under other sections) is made sec.50C can never be made applicable.