Joint Development Agreement: Income Tax Liability arises at the time of issue of completion certificate.

 

Concept of Joint Development Agreement : It is the registered agreement in which person owning land enter into agreement with another person  to develop a real estate project on such land in consideration of share in that project with or without cash consideration.

Applicability of Section 45(5A) : The tax liability would arise only when the certificate of completion is issued wholly or in part. . It means that if the JDA is for development of 5 building in a particular area and the builder has completed just one building then the tax liability would get attracted for all the 5 building and would not be restricted to just one building which is completed. Completion of 1 building would be treated as part completion and the liability would get affixed. This benefit is available only to an individual and HUF and other taxpayers like company, firm, AOP, LLP etc cannot take the benefit of special tax provision incorporated in section 45(5A).

Full Value of consideration: The tax liability arises on the basis of “Full Value Consideration” (FVC). FVA is normally synonymous with sale consideration in common parlance. Stamp duty value of share in the project on the date of issue of certificate of completion as increased by any consideration received in cash in required to be taken as FVC for the purpose of section 45(5A).

Non applicability of sec 45(5A): The benefit of sec 45(5A) is not applicable if the assessee transfer his share in the project before the issue of completion certificate of project. In such case, capital gain tax liability would arise in the previous year in which transfer take place.