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CA. S. N. Goyal CA. Pranay Goyal
Interpretation of Provisions of

Section 45(5A) of the Income-Tax Act:

Joint Development Agreement

INTRODUCTION determining the value of sale consideration
1. Sub section (5A) to section 45 has been inserted received in the form of developed real estate.
under the Income Tax Act, 1961 to provide taxability The Finance Act, 2017 has now introduced section
of capital gains arising to the land owner being 45(5A) with the intent to address few of these
Individual or HUF, in case of transfer of land or issues. The said section 45(5A) provides that in the
building or both to the developer under a joint case of a specified agreement, the transfer of a
development agreement which is in the nature of capital asset, being land or building or both by an
'specified agreement'. In fact, the issue to determine individual or HUF shall be chargeable to tax in the
the year in which the land etc. can be said to have year in which the certificate of completion for the
been transferred and may be brought to tax and the whole or part of the project is issued by the
determination of the value of consideration received competent authority. In order to avoid ambiguity,
in kind has been controversial. Joint development the terms 'competent authority', 'specified
agreements a restructured in complex manner and it agreement' and 'stamp duty value' have been
becomes difficult & controversial to determine the defined under Explanation to section 45(5A).
year of transfer of land etc. and the value of sale
By virtue of section 45(5A), the year of taxability in
consideration to be received in the form of respect of transactions involving the transfer of
developed real estate. There have been conflicting immovable properties being land and building can
judicial decisions rendered on these issues by the
be classified under the following categories:
different courts.
a. When the assessee receives the share of
Section 45(5A) has been introduced on the statute, constructed premises and retains the same till
in our considered opinion, with the object to resolve the issuance of the completion certificate, the
the above controversies regarding the taxability of
year in which the certificate is issued.
capital gains in the case of transfer of land etc. to the b. When the assessee transfers his/her share, prior
developer by the Individual and HUF being land to the date of issue of completion certificate, the
owners by providing the year of taxability and
provisions of section 2(47) would apply and the

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