There was a lot of controversy on the date of accrual of capital gains to the Landowner in case of a Development Agreement. After a plethora of judgements the law was more or less settled that such capital gain would accrue on the date of the Development Agreement cum GPA. Tax payers were finding it very difficult to pay tax when the builder had not even commenced construction. In several cases the builders would delay the project inordinately and in many cases the projects were never started.
The relevant law has been amended for Agreements which will be entered into on or after 01/04/2017. In such cases capital gains, in the hands of the Landowner, shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. For the purposes of section 48, i.e. calculation of Sale Consideration, the stamp duty value, on the date of issue of the completion certificate, of his share, being land or building or both in
the project, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
However, it is also provided that the provisions as stated above shall not apply where the assessee transfers his share in the project on or before the date of issue of the said certificate of completion, and in such cases capital gains shall be deemed to be the income of the previous year in which such transfer takes place.