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Computation of income tax liability in the hands of the land owners upon execution of a development agreement has been a matter of litigation for ages. The injustice is caused to the land owners due to capital gain tax liability arising on the date of execution of the DA and handing over possession of the land to the Developer.
Section 45(2) of Income Tax Act deals with the cases where a capital asset is converted into stock in trade. Whenever a capital asset is converted into stock in trade by an assessee it is deemed as transfer of capital asset and attracts capital gain provisions, in spite of the fact that the ownership of such capital asset doesn’t change by such conversion.
The issue under consideration is whether the High Court was right in taking the date of award as the date of accrual of capital gains for the purpose of Section 45 of the Act of 1961?
(1) General Provision [Section 45(1)]:- Any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to Income-tax under this head in the previous year in which the transfer took place. (2) Special Case [Section 45(2)]:- A person who is the owner of a capital asset […]
The issue under consideration is Unlisted shares sold after holding for 23 months considered as Long Term Capital Gains or Short Term Capital Gains?
The issue under consideration is whether land held as stock, transferred upon HUF – partition, tantamount to conversion into capital asset for the purpose of imposing a capital gain tax?
Whether the CIT(A) is correct in holding that consideration received on assignment of know-how is chargeable to tax as Capital Gains?
Whether the AO is correct in considering that the capital gain will arise in the year when the land is transferred to the co-operative society formed by the flat purchasers and not when flats are sold?
Section 45 of the Income Tax Act, 1961 (‘Act’) is the charging section of the income chargeable under the head Capital Gains. In the ordinary course, a transaction is subject to capital gain in the year of transfer of the capital asset. In case of the Joint Development Agreement (‘JDA’) or Specified Agreement (‘SA’) where the capital asset being land, building, or both have been transferred to the developer, such transaction is taxable in the year of transfer.
The issue under consideration is whether A.O. is correct by adding long term capital gains by applying section 50C in case where land is transferred by the partner in his firm as capital contribution?
