Taxability and taxable amount - Land possession

[sm surana]

Please advise the taxability issues including the year of taxability and taxable amount? Assessee bought a piece of land in F.Y. 09-10 for Rs. 8 lacs and entered into collaboration agreement. The gist of agreement is as follows : - ľ Date of agreement Sept. 2009 between assessee and developer. ľ Cost of construction to be born by developer. ľ Sharing of built up area with proportionate undivided ownership rights in land underneath. Assessee will get one floor and developer will get 2 floors. ľ Common areas will be used by both the parties. ľ Developer shall pay Rs. 10 lacs as proportionate cost of land for its share to assessee and also for equalising the share of assessee in allocation. ľ Assessee has handed over the possession of Land in Oct. 2009. ľ Developer to complete the construction within 12 month otherwise developer shall pay monthly penalty of Rs. 10,000/- to the assessee. ľ Assessee has irrevocably appointed the developer as lawful attorney in connection with construction. ľ Developer is free to negotiate with buyer (for its share) for sale. ľ Developer will issue the receipts under his signature.

AI Summary

Tax Implications for Land Transaction: Investment vs. Stock in Trade Affects Income Classification Under Tax Laws A query was raised regarding the taxability and taxable amount related to a land transaction where the assessee bought land in the fiscal year 2009-10 for Rs. 8 lakhs and entered a collaboration agreement with a developer. The agreement included the developer bearing construction costs, sharing built-up areas, and paying Rs. 10 lakhs to the assessee. The assessee handed over land possession in October 2009, with a construction deadline of 12 months. The response suggested that the tax treatment depends on whether the land is considered stock in trade or an investment, affecting whether income is taxed under 'business or profession' or 'capital gains.'