Cloud Ltd., a real estate development company, entered into a Joint Development Agreement with Mr. Ashok, a resident individual, whereby Mr. Ashok…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2024
Cloud Ltd., a real estate development company, entered into a Joint Development Agreement with Mr. Ashok, a resident individual, whereby Mr. Ashok would transfer a plot of land measuring 10 acres for a part consideration of 6.5 crores to be paid on the date of agreement, i.e., 1.6.2023. Cloud Ltd. has planned to develop a high-rise apartment complex on such land by 31.3.2026. Upon completion of the project, Cloud Ltd. would transfer 6 flats in the apartment to Mr. Ashok as final settlement. The FMV of the flats is estimated to be - 1.35 crores each as on 31.3.2026.

Suggested Answer and Working Notes:

Mr. Ashok, a resident, is entering into an agreement with Cloud Ltd., a real estate developer, to develop a high-rise apartment complex on his land for a consideration of 6.5 crore and 6 flats in the apartment. This is a specified agreement under section 45(5A). As per section 194-IC, Cloud Ltd. is required to deduct tax at source @ 10% on 6.5 crores, being the consideration paid other than consideration in kind, under a specified agreement to Mr. Ashok. Tax is to be deducted at the time of credit of such sum or payment, whichever is earlier. Tax u/s 194-IC would be = 6.5 crore x 10% = 65 lakhs

Topics: Deduction, Collection and Recovery of Tax

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