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capital gains on transfer of land or
building would be subject to tax in the
year of transfer of such share.
The manner in which this section is
worded seems to throw up several new
issues. An attempt is made in this
article to address these issues.
Scope of section is limited
2. A perusal of the sub-section would
reflect that this provision is only
applicable to individuals and HUF.
Thus, all other persons including co-
operative societies, partnership firms,
LLP and companies have been excluded out of the plots of land and have entered into JDAs for
purview of this section. There seems to be no developing the property.
rationale behind excluding other assessee and this Such a view, although aggressive and not in
will result in difference in tax implications for the consonance with the intent of the Legislature, could
same transaction for different assessee which is lead to undue harassment and prolonged litigation.
against the principle of equity in taxation. Suitable clarifications from Central Board of Direct
Section 45(5A) applicable only in case of capital Taxes ('CBDT') could help mitigate the same.
assets Year of transfer v. Year of chargeability
3. Further, these provisions are only applicable to 4. The rationale in introducing this sub-section as
those individuals or HUF who are holding the land as stated in the Memorandum to the Finance Bill, was
a capital asset. In order to determine whether the to remove hardship of assessee in paying tax in the
land is held as a capital asset or a business asset, it year of handing over of possession of the property.
would have to be judged on commercial principles as Thus, by virtue of the introduction of sub-section
well allied laws governing the transfer of land or (5A) to section 45, the chargeability to income tax on
building. This issue by itself has been subject matter execution of JDA has been deferred to the year of
of long drawn debate and disputes in the past. There issue of completion certificate. It is pertinent to note
are number of decisions of Courts and one would that the manner in which provisions are worded
find decisions in favour and against the assessee. seems to show that the Legislature has only sought
Hence, the said controversy may have to be faced by to defer the year of chargeability to tax and not the
the taxpayers. year of transfer of the asset.
Moreover, one may also take help of the definition of This implies that the year of transfer of the land or
a "promoter" of a real estate project under RERA building would continue to be governed by the
which is defined to include a person who develops definition of transfer u/s. 2(47) of the Act and by the
land into a project, whether or not he constructs any catena of decisions of various High Courts in the case
structure on the said plot, for the purpose of selling of Chaturbhuj Dwarkadas Kapadia v. CIT [2003] 260
all or some of the plots in the project to a third party. ITR 491/129 Taxman 497 (Bom.) and C.S. Atwal v. CIT
Based on this definition, a view could be taken by the [2015] 378 ITR 244/234 Taxman 69/59 taxmann.com
tax authorities that the l and owner, being a 359 (Punj. &Har.) and Tribunals in the case of Mrs.
promoter, is in the business of real estate DurdanaKhatoon v. Asstt. CIT [2013] 33
development and hence would not be governed by taxmann.com 311/58 SOT 1 (Hyd.- Trib.) and Asstt.
section 45(5A) of the Act. This could especially have CIT v. Jawaharlala L. Agicha [2016] 75 taxmann.com
an impact on those land owners who own several 121/161 ITD 429 (Mum.- Trib.) and several other
Every strike brings me closer to the next home run. 44
