A JDA is a legal contract that allows landowners and developers to join forces for land use planning. Currently, JDA is a common form of real estate development in India in all sectors. This amount of rs.1833333 /- is taxable under capital gains (long-term) for P.Y 2018-19. The concept of changing the liability of capital gains is introduced in this section to minimize the actual difficulties faced by the owner of land or immovable when paying out capital gains in the transfer year. To do this, the landlord must transfer the right to sell the property to the builder by signing a General Power of Attorney Agreement (GPA). In principle, the builder can only sell the shares in these projects in the name of the owner. Even then, it would be the owner who would grant the deed of transfer in favor of the buyers. Applying the definition of transfer, the transfer took place under these joint development agreements in the year in which the land, land or building, or both, were handed over to the developer. The appraiser is a person who has entered into a cooperation agreement with a developer regarding 1/3 of his property in New Delhi. The cooperation agreement was concluded on 1 June 2006 and the relevant date of the transfer of ownership was 19.08.2008, the date on which the construction was completed and the property was handed over to the appraiser, who fulfilled all the obligations arising from the cooperation agreement.
The appraiser argued that the transfer of ownership took place in the 2009/10 valuation year and not in the 2007/08 assessment year. The new subsection contains many essential conditions, one of which is that the “specified agreement” must be a recommended document. A specified agreement is an agreement “in which the landowner confers on the developer the right to develop the land or building in exchange for a share of the land or building so developed.” In fact, it can be said that the joint development agreement is a trade agreement in which both parties try to use their respective resources in the best possible way and without significant financial investments. The owner brings his land that he already owns, and the developer uses his experience and expertise in the development and marketing of real estate projects. The value of the stamp duty of the landowner`s share in the project at the time of issuance of the certificate of completion shall be deemed to be the value of the consideration received or accumulated as a result of the transfer of the capital assets. The law on the time of transfer under the JDA has evolved through a series of decisions in which the courts have ruled that on the day of entry into the JDA itself, there is a “transfer” by the landowner equal to the developer`s share in the land and that capital gains are triggered at that time in the hands of the landowner. A typical joint development agreement is usually structured, which includes various elements with financial implications, which are discussed below: – Interestingly, in the case of Tamil Nadu Brick Industries, ITAT Chennai stated that “if a general power of attorney is signed by the owner in favor of the developer who grants all rights in favor of the property, the same would apply to a transfer under section 2(47)(v) of the Act. and that capital gains are generated during the year in which the AMP is carried out. For the purposes of this section, the right to develop the land is exercised by a JDA, so the same applies as the specified agreement. It is important to understand that the partnership between the two parties is limited only until the development of the project and the JDA do not allow the builder to sell real estate himself. Indeed, section 53A (which deals with the partial performance of a contract) of the Transfer of Ownership Act 1882 states that developers cannot be the purchaser or purchaser of development work under the JDA.
For the development of a real estate project, there must be costs for obtaining various permits from regulatory authorities, including land use change, payment of external and internal development fees, construction costs of the property, project marketing costs such as advertising fees, mediation/commission to agents for the sale of the project and financial costs, etc. Landowners may have land that has the potential to generate huge monetary benefits. However, they may not have the finances or know-how, or both, to carry out large-scale development. Developers, on the other hand, may have the cash flow and real estate development expertise, but may not own land in prime locations. The above-mentioned method of taxing capital gains presented many landowners with challenges that were forced to meet the tax liability even before the project was completed and consideration was received. The controllability of the JDA under the Information Technology Act has always been a contentious issue. If the landowners hold the land as a capital asset, it is taxable as a principal capital gain. The capital gains charge included in § 45 provides for the transfer of fixed assets to be subject to tax in the year in which the transfer takes place. Therefore, the determination of landowners` tax liability under a JDA depends on the timing of the transfer of the capital assets. Land mortgage approval can be granted by the owner so that the developer can raise the funds for development by creating the land fee. The approval of the mortgage can be granted on the entire land or on the part of the land that is the responsibility of the developer. Regarding the registration of the cooperation agreement, the Supreme Court in the Balbir Singh Maini case stated the following: It is very important to know how the conditions for granting marketing rights and transferring title to the developed property to customers are set out in the joint development agreement.
who will ultimately decide the relationship, the mutual rights of the owner and the developer and the resulting tax implications. It is important to know when and how the developer obtains the right to transfer ownership of the developed units to the customers, who can ultimately decide on the transfer of ownership of the land from the owner to the developer, which in turn would have the tax consequences. As we have already mentioned in this article, the taxation of the landowner at the stage of joining the JDA itself caused him unreasonable financial difficulties. To alleviate the difficulties, the Finance Act of 2017 introduced an amendment by inserting a new paragraph (5A) in Article 45 w.e.f. 1 April 2018. The new provision states that capital gains would accrue in the hands of the landowner once the certificate of completion is issued by the authority upon completion of the project or part of the project. The main features of the new section are summarized as follows: In fact, a joint development agreement has the character of a joint venture between the landowner and the developer. There is no fixed rule regarding the terms of the joint development agreement that must be established between the parties. The terms of such an agreement may be determined by the parties based on various factors such as the needs and relationships of the parties, business considerations, the goodwill and reputation of the promoter, tax considerations, etc.
In cases where JDAs are seized using the area sharing method, landowners receive a share of the over-built structure in return. In that case, the landowner would not have received any consideration at the time of the execution of the GPA, since the buildings/apartments would not have been constructed and handed over. In such a situation, the question may arise as to how to determine the capital gains in the hands of the landowner. A joint development agreement is the pooling of the respective resources by the landowner and the developer of the property, who can be represented as – Mr. “O” owns a parcel of land that can be developed as a residential or commercial real estate project, but does not have the experience and expertise to develop and market the project. Mr. `O` works with Mr. . .
