Tax treatment for Landowner under Joint Development Agreements (JDAs)

[sujittalukder]

A company which deals in real estate transactions has entered in JDA with another developer for development of a project on a piece and parcel of land owned by it. The land is shown as Fixed Assets on the Balance of the Company.

The developer took three years time to complete the project and after which the landowner's share in the project was handed over to the landowner.

The company has paid Capital Gains Tax in the year in which JDA was entered into with the developer by virtue of applicability of Section 2(47)(v) i.e. three years back the capital gains tax was paid.

Now, after three years the landowner will account for the share of project received from the developer in lieu of exchange of land under the JDA.

The landowner will record the share of project as "Buildings" in its books and as per AS-10, the "Building is recorded which is much higher than the proportionate land extinguished in favour of developer. The difference between the land cost and the value of building is thus deriving "Gain" and recognized as "Profit on sale/exchange of assets" and transferred to P&L account.

Once the gain is transferred to P&L a/c, it hits MAT u/s 115JB of the Income Tax Act.

Now my query is-
Due to difference in point of taxation for the same transaction – Exchange of land for Building, "Capital Gains Tax" and "MAT" occurs in different years and taxes are paid on both the years. Is this correct? What should be the correct approach for accounting treatment so that the same transaction should not suffer taxation in two different years?

Had Capital Gain and Recognition of Building in Books took place in the same year; tax on capital gain and MAT would have set off each other in determining the Total Income on which tax is payable. But since here, the two events is taking place on the same transaction in two years, tax is paid in two years and the benefit of combining Capital Gain and MAT income is lost.

Please advice.

Regards
Sujit Talukder