Capital Gain

[Ethirajan Parthasarathy]

“A” owns a site absolutely and the neighbouring site is owned by “B” absolutely. Both “A” and “B” give their sites for joint development to same builder.

Under the advice of developer, the two sites are amalgamated so as to get more floor area. My query is whether any capital gain tax is attracted when two sites of “A” & “B” are amalgamated.

This is because when sites are amalgamated, “A” gets 50% right in site owned by “B” previously and vice versa. Does it amount to exchange and capital gain tax is payable.

Invite experts opinion on this.

AI Summary

Capital gain on joint development projects: tax triggered on project completion certificate issuance rather than on transfer by possession.
Execution of a joint development agreement and delivery of possession to a developer constitutes a transfer attracting capital gain; however, for individuals and HUFs gains from land or building under a specified agreement are deferred and taxed in the year the competent authority issues the project completion certificate. If the owner transfers his project share before that certificate, gains arise in that year. Sale consideration for computation is the stamp duty value of the owner's share on the certificate date plus any cash received, and developers must deduct TDS on additional payments to landowners.