Taxpublishers.in - Monday Corner Answer to the Quiz for the week (05 May 2025)

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Quiz for the week (05 May 2025): Fazal Ahmed a resident individual owned a piece of land measuring 12,000 sq.ft. On 15th July, 2023 he entered in to a JDA with Rosy P Ltd. The FMV of the land as on 1st April,2001 was Rs. 24 lakhs. The guideline (stamp duty) value on that date was Rs. 30 lakhs. The FMV of the land on 15th July, 2023 was Rs.300 lakhs and the stamp duty value on that date was Rs.350 lakhs. Fazal received Rs.20 lakhs on 31st August,2024; Rs.50 lakhs on 30th September,2024. He is eligible for 4 apartments (of 3 BHK each) whose stamp duty value was Rs. 60 lakhs each when they were was given to him in March,2025. The certificate of completion was received for the project in March, 2025. Discuss the income tax implication for both the parties. Best Answer : The assessee in this case has a land which was acquired prior to 1st April, 2001. The FMV as on 01.04.2021 was Rs.24 lakhs and the stamp duty value on the same date was Rs.30 lakhs. The proviso to section 55(2)(b) says that in the case of capital asset being land or building or both, the FMV of the asset as on 1st April, 2001 for the purposes of adopting the same as cost of acquisition shall not exceed the stamp duty value, wherever applicable, of such asset as on the first day of April, 2001. Therefore, the fair market value of Rs.24 lakhs is to be adopted. The individual entering into JDA with Rosy (P) Ltd is eligible for 4 apartments whose stamp duty value was Rs.60 lakhs each which means the benefit equivalent to Rs.240 lakhs. Besides, consideration in kind, the assessee-transferor of land received Rs.70 lakhs in cash. Thus, the consideration received amounts to Rs.310 lakhs. The assessee is chargeable to tax for the capital gain in the assessment year 2025-26. The certificate of completion is the key factor and it was obtained in March, 2025. The consideration by way of cash was also received after 23.07.2024. Therefore, the assessee can claim the benefit of opting either the indexed cost of acquisition or the actual cost of acquisition i.e. FMV as on 01.04.2001 for computing capital gain. The indexed cost of acquisition would be Rs.24 lakhs X 363/ 100 = Rs.87.12 lakhs. The long-term capital gain hence would be Rs.310 lakhs minus Rs.87.12 lakhs = Rs.2,22,88,000 liable to tax @20% plus surcharge and cess. If the indexation benefit is not adopted the capital gain would be Rs.310 lakhs less Rs.24 lakhs = Rs.286 lakhs which is liable to tax @12.5% besides surcharge and cess. Prima facie, it is advantageous to admit long-term capital gain without indexation benefit. As regards Rosy (P) Ltd the monetary consideration paid and the apartment given in pursuance of JDA would go to reduce the profit of the project or it could be treated as cost of acquiring developmental rights. Anyway, the amount of Rs.310 lakhs would be treated as expenditure for computing the income from the project.

Quiz for the week (05 May 2025):

Fazal Ahmed a resident individual owned a piece of land measuring 12,000 sq.ft. On 15th July, 2023 he entered in to a JDA with Rosy P Ltd. The FMV of the land as on 1st April,2001 was Rs. 24 lakhs. The guideline (stamp duty) value on that date was Rs. 30 lakhs. The FMV of the land on 15th July, 2023 was Rs.300 lakhs and the stamp duty value on that date was Rs.350 lakhs. Fazal received Rs.20 lakhs on 31st August,2024; Rs.50 lakhs on 30th September,2024. He is eligible for 4 apartments (of 3 BHK each) whose stamp duty value was Rs. 60 lakhs each when they were was given to him in March,2025. The certificate of completion was received for the project in March, 2025. Discuss the income tax implication for both the parties.

Best Answer :

The assessee in this case has a land which was acquired prior to 1st April, 2001. The FMV as on 01.04.2021 was Rs.24 lakhs and the stamp duty value on the same date was Rs.30 lakhs. The proviso to section 55(2)(b) says that in the case of capital asset being land or building or both, the FMV of the asset as on 1st April, 2001 for the purposes of adopting the same as cost of acquisition shall not exceed the stamp duty value, wherever applicable, of such asset as on the first day of April, 2001. Therefore, the fair market value of Rs.24 lakhs is to be adopted. The individual entering into JDA with Rosy (P) Ltd is eligible for 4 apartments whose stamp duty value was Rs.60 lakhs each which means the benefit equivalent to Rs.240 lakhs. Besides, consideration in kind, the assessee-transferor of land received Rs.70 lakhs in cash. Thus, the consideration received amounts to Rs.310 lakhs.

The assessee is chargeable to tax for the capital gain in the assessment year 2025-26. The certificate of completion is the key factor and it was obtained in March, 2025. The consideration by way of cash was also received after 23.07.2024. Therefore, the assessee can claim the benefit of opting either the indexed cost of acquisition or the actual cost of acquisition i.e. FMV as on 01.04.2001 for computing capital gain.

The indexed cost of acquisition would be Rs.24 lakhs X 363/ 100 = Rs.87.12 lakhs. The long-term capital gain hence would be Rs.310 lakhs minus Rs.87.12 lakhs = Rs.2,22,88,000 liable to tax @20% plus surcharge and cess.

If the indexation benefit is not adopted the capital gain would be Rs.310 lakhs less Rs.24 lakhs = Rs.286 lakhs which is liable to tax @12.5% besides surcharge and cess.

Prima facie, it is advantageous to admit long-term capital gain without indexation benefit.

As regards Rosy (P) Ltd the monetary consideration paid and the apartment given in pursuance of JDA would go to reduce the profit of the project or it could be treated as cost of acquiring developmental rights. Anyway, the amount of Rs.310 lakhs would be treated as expenditure for computing the income from the project.