Capital Gain arising out of JDA

[Ethirajan Parthasarathy]

To avoid controversy, the government has introduced section 45(5A) making it clear that for registered JDA only the capital gain will be levied at the time of completion of projects.

There is no specific mention that for unregistered JDAs, the capital gain will be levied in the year in which JDA is signed. Hence, whether one can take a stand even for unregistered JDA, capital gain tax is payable at the time of completion as laid down by many courts. Eg:- CIT vs. Smt. Najoo Dara Deboo - 2013 (9) TMI 685 - ALLAHABAD HIGH COURT

Section 45(5A) also specifies that one should get completion certificate from a competent authority as proof of completion for deferment of capital gain tax.

My another query is how to go about in the situation where no completion certificate is available since it is not mandatorily required to be issued for small projects.

AI Summary

Capital Gains Tax Timing for Joint Development Agreements: Section 45(5A) Uncertainties and Compliance Issues for Unregistered Projects The discussion addresses capital gains tax implications for Joint Development Agreements (JDAs). Section 45(5A) of the Income Tax Act specifies that capital gains tax for registered JDAs is payable upon project completion. However, it is unclear if this applies to unregistered JDAs, leading to debate on whether tax should also be deferred until completion, as supported by certain court rulings. Additionally, the section requires a completion certificate for tax deferment, raising concerns about compliance for small projects where such certificates are not mandatory. The query seeks guidance on handling situations without a completion certificate.