Untitled-1 [kscaa.com]

Karnataka State Chartered Accountants Association (R)# 7/8, 2nd Floor, Shoukath Building, SJP Road, Bangalore - 560 002,

Ph: 080-2222 2155, Tel.Fax: 2227 4679, Email: [email protected], website: www.kscaa.co.in

ONE DAY SEMINAR ON

TAX IMPLICATIONS ON REAL ESTATE SECTOR

on 11th October 2014

at ‘Edinburgh Hall’Hotel Fortune Park JP Celestial

# 5/43, Race Course RoadAnand Rao Circle,

Bangalore

DISCLAIMER :

The views expressed in the articles and the advertisements are the personal views of the contributors.

The Karnataka State Chartered Accountants Association (KSCAA) does not necessarily concur with the

same. The opinions expressed in the articles should not be construed as legal or professional advice.

Neither the KSCAA, the publisher nor the contributors are responsible for any decisions taken by readers/

users of the background material, on the basis of these views.

C Karnataka State Chartered Accountants Association, Bangalore.

Price : Rs. 175/-

Published by :CA. Raveendra S. KorePresidentKarnataka State Chartered Accountants Association,# 7/8, Shoukath Buildings, SJP Road,Bangalore – 560 002.Ph: 080-2222 2155, 3291 6045, Tel.Fax: 2227 4679,Email: [email protected], website: www.kscaa.co.in

Printed at :Jwalamukhi Mudranalaya Pvt. Ltd.44/1, K.R. Road, Basavanagudi, Bangalore - 4Ph: 080-26608090, 26617243E-mail : [email protected]

KARNATAKA STATE

CHARTERED ACCOUNTANTS ASSOCIATION

ActivitiesThe Association regularly conducts

seminars, conferences, workshops, studycircle meetings of professional interest formembers and public. The Association isconducting Endowment lectures also. Itbrings out News Bulletin for the benefit ofmembers every month.

An abstract of the activities conductedis given hereunder.

Facilities / Activities of KSCAA for the Benefitof Members

● Regular Study Circle Meetings /Seminars / Conferences / Workshops /Endowment Lectures.

● Programmes in Mofussil areas.● Conducting Corporate Training

Programmes for corporate executives inthe fields of Accountancy, Taxation,Auditing etc.

● Conducting State Level Conferenceevery year.

● Assistance for members’ employment.● Publication of News Bulletin every

month containing Articles ofProfessional Interest & other usefulinformation.

● Cultural Programmes & Family get-togethers.

● Sports Activities.● Representation before various

Government Departments on generalgrievances of members.

● Honouring Chartered AccountantExamination Rank holders by givingprizes.

● Distribution of Books to needy anddeserving students from the StudentsWelfare Fund.

V I S I O N

• KSCAA shall be the trusted and value based knowledgeorganisation providing leadership and timely influence tosupport the functional breadth and technical depth of everymember of CA profession;

• KSCAA shall be the nucleus of activity, amity and unity amongmembers aimed at enhancing the CA profession’s socialrelevance, attractiveness and pre-eminence;

• KSCAA shall in the public interest, be a proactive catalyst,offering a reliable and respected source of public statementand comments to induce effective laws and good governance;

• KSCAA shall be the source of empowerment for leadershipand excellence; disseminating knowledge to members, publicand students; building a framework for new opportunities andpartnerships that enhance life in the community and beyond;encouraging highest ethical standards and professional integrity,in realization of India global leadership vision.

M I S S I O N

• The KSCAA serves the interests of the members of CAprofession by providing new generation skills, amity, unity,networking and leadership to strengthen the professionalcapabilities, integrity, objectivity, social relevance, standardsand pre-eminence of India’s Chartered Accountants nationallyand internationally through; becoming gateway of knowledgefor Chartered Accountants, students and public; helpingmembers add value to their customers/employers by enhancingtheir professional excellence and services; offering a reliableand respected source of public policy advice and commentsto bring about more effective laws and policies and transparentadministration and governance.

MOTTO: KNOWLEDGE IS STRENGTH

ONE DAY SEMINAR ON

TAX IMPLICATIONSON REAL ESTATE SECTOR

4

MESSAGE

I am immensely happy to note that a one day seminar on “Tax Implications on Real Estate Sector” is being

organised by Karnataka state Chartered Accountants Association (R) to have an in-depth understanding of

various tax laws related to Real estate transactions while we CAs render services to our clientele.

I am confident that the participants would be greatly enriched with the deliberations at the seminar by our

expert and eminent speakers. On behalf of Bangalore Branch of SIRC of the ICAI, let me congratulate CA

Raveendra S Kore, President and the Committee Members of KSCAA for having organised this seminar to

make us understand Tax matters and other amended areas involved in real estate sector, which plays a

pivotal role in fuelling the growth of economic development of our great nation.

On behalf of Bangalore Branch of SIRC of the ICAI, I wish the seminar a grand success.

With warm Regards

CA. Babu K. Thevar

CA. Babu K. ThevarChairmanBangalore Branch of SIRC of ICAI

Bangalore Branch ofSouthern India Regional Council of

The Institute of Chartered Accountants of IndiaBangalore

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The One Day Seminar on “TAX IMPLICATIONS ON REAL ESTATE SECTOR” has been organized by

KSCAA to supplement the needs of the members of our profession to enhance and update their

domain knowledge in the field of Real Estate sector and provide effective service to their clients.

The Bangalore being the Hub of real estate sector and the industry is galloping inspite the general

slowdown else where in India. This sector is presently facing a lot of litigations in the tax matters

resulting in increased cost of the project and ending up with higher payouts from the ultimate customer.

It gives me immense pleasure to present this useful booklet containing background material for the

seminar, which is a collection of excellent articles / view points on various issues in Real Estate Sector,

on the occasion of one day seminar on Tax implications on Real Estate Sector organized by our

association on 11th October, 2014.

The booklet contains useful articles written by the esteemed speakers, who are experts in the field of

Law ,Taxation and Drafting. I am sure that this booklet would be of great help for all the delegates.

We gratefully acknowledge the support and contributions from our Executive Committee Members

and Sponsor M/s. Puravankara Projects Limited. Also I thank the printers Jwalamukhi Mudranalaya Pvt

Ltd for printing it within short span of time.

With warm regards

CA. Raveendra S. Kore

MESSAGE

CA. Raveendra S. KorePresidentKarnataka State Chartered Accountants Association

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1. Academic

a) Qualifications B.Com, FCA, ACSLLB, Grad.CWA,

b) Achievements 1st Rank in B.Com38th Rank CA Inter24th Rank CA Final2nd Rank ICWA Inter25th Rank ICWA Final

2. Professional

a) Practicing as Advocate 23 years as CA and advocate

b) Specialisation Excise / Customs /Service TaxForeign Trade Policy /FEMA

Note: Specialising in indirect tax planning and litigation. Appears frequently before Courts.

3. Others

a) Visiting faculty Indian Institute ofManagement, BangaloreCA Institute

b) Has addressed large number of seminars and published several papers in national magazines on Excise /Customs/ Service Tax

c) Author of books:

i. ‘Landmark decisions in Indirect Taxes’ published by international publishing house CCH.

ii. ‘Central Excise Law and Procedures’ published by RK Jain, New Delhi, the largest publisher on indirecttaxes.

iii. ‘Background Material for E-Learning course on SERVICE TAX’ published by ICAI.

CA. Raghuraman

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CA. Chythanya K.K.

Qualification: B.com, FCA, LLB

Academics:

1. II PUC Commerce Eighth rank in Karnataka State

2. B.com First rank in Mysore University

3. CA Intermediate Forty seventh rank (All India)

4. CA Final Fifteenth rank (All India) topping Karnataka State

Professional

1. Articleship Price Waterhouse Coopers, Bangalore

2. Industrial Training Hindustan Lever Limited, Bangalore

3. Practice ❖ As chartered accountant for fourteen years specialising in taxation matters

❖ Now as an advocate in Bangalore

Others:

1. Guest/Visiting Faculty at IIM, Bangalore, MDPs of ICAI, New Delhi & Bangalore and Direct taxes trainingcentre of Income tax department.

2. Presented papers in income tax and VAT at various Metros and other cities.

3. Member of study group of ICAI for framing Guidance Note on Transfer Pricing.

4. Co-authored a book on Tax Holiday under Sections 10A & 10B published by Wolters Kluwer, a reputedGerman publisher and authored a book on Special Economic Zone.

5. Contributed articles for the ITR, ‘Chartered Accountant’, BCAJ, Taxman, CTR, and other journals.

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Sri Arvind RaghavanEDUCATIONAL QUALIFICATIONS❖ ICSE from St. Joseph’s Boys High School

❖ ISC (Commerce)from Bishop Cottons Boys School

❖ Bachelor of Commerce from Bangalore University

❖ Bachelor of Law from Bangalore University

❖ Post Graduate Diploma in Export and Import management

AREAS Of SPECIALISATION❖ Scrutiny of Documents of Title relating to immovable properties, title tracing, Documentation, Legal opinions, advising

on conversation of lands, change of land use and all other property related matters.

❖ Written several Articles on immovable properties which have been published by professional institutes and chambers ofcommerce.

WORK EXPERIENCE❖ Has been involved in property matters for the last 20 years

❖ Has been the only Legal advisor in the panel of ANZ Grindlays bank giving legal opinions on properties coming under theHome loans and Property Gainz Schemes from 1995 to 2000 until its merger with Standard Charter bank.

❖ Was a columnist in “The Hindu” publishing every Saturday under the “Property Plus” supplement a columns titled as“Legal Chat”and”Fact File”, an article on property laws and personal laws and also answering questions from generalpublic in a column titled as “Forum”.

❖ Has published several papers in property journals and conducted real estate workshops for the Real Estate sector.

❖ Presently appointed by the Government of Karnataka, a Revenue Department (BHOOMI & UPOR) as an advisorto help in the regulation, simplification and transparency of land records in the State.

❖ Presently the Legal Advisor on Property matters to various reputed companies and Corporations.

❖ Presently empanelled with PNB Housing Finance Limited and Canara Bank.

SKILLS, HOBBIES AND OTHER INFORMATION❖ General skills – Excellent verbal and written communication skills. Has presented lectures in more than 100 seminars

organized by various forums especially on property matters.

❖ Languages – English, Kannada, Hindi, Tamil.

❖ Date of Birth –31.10.1966

❖ Tennis – Has represented the State Juniors in various tournaments all over the country.

❖ Music & Reading – Carnatic, Hindustani, Pop, Fiction, Business Journals.

❖ Extra Curricular Activities –Was the District Rotaract Representative for R.I.District – 3190 during the year 1992-93

Is currently the Chairman and Managing Trustee of BalaByraweshwara Educational and Charitable Trust, Bangalorewhich is providing amenities and facilities at present to about 5165 students studying in about 52 Government Schoolsin Pandavapura Taluk, MandyaDistrict.

3RD TECHNICAL SESSION

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DEVELOPMENT AGREEMENT – DRAFTINGAND RELATED ISSUESARVIND RAGHAVAN, B Com, LLB

Advocate, Bangalore

CHAPTER - 1

INTRODUCTION

I. GENERAL:

For persons belonging to all walks of life, whether inbusi-ness, profession or service, there is aconstant need for interaction with others. Suchinteraction is possible only through propercommunication. In the field of trade and commerceand in the field of transactions in properties it is the written communication between the parties which brings about a legal relationship creating mutualrights and obliga-tions. Drafting in this contextinvolves the creation of a document, record or otherevidence to establish, confirm and define such mutualrights and obligations which are enforceable in Courtsof Law or other legal forums.

II. DRAFTING:

‘Drafting’ can be defined as the “confluence of lawand fact in a language form”.

III. DOCUMENT DEFINED:

1. The plain dictionary meaning of the word document is as follows:

“A paper containing information or proof or evidence”. Document is also defined as “aninstrument on which matter is recorded which maybe proof or evidence”.

2. The General Clauses Act 1897 defines document as follows:

“Document shall include any matter written, expressed or described upon any substance bymeans of letters, figures, or marks, or by more thanone of those means which is intended to be used orwhich may be used for the purpose of recording thatmatter”.

IV. LEGAL DOCUMENT:

It can be described as a document which is a formalrecord of any matter, that creates, establishes,confirms or defines rights and obligations betweenparties in relation to the facts, events andtransactions between them which are enforce- ablein courts of law or other legal forums.

V. DRAFTING OF A LEGAL DOCUMENT:

The drafting of a legal document has four importantaspects.

a) Factual Accuracy

b) Legal Perfection

c) Precise Expression

d) Formal Statutory Compliance

1. FACTUAL ACCURACY:

The factual accuracy of a document consists of properpresentation of all relevant facts in a logical andchronological order, leaving no room for any doubt orambigui-ty, in respect of their meanings andinterpretation. The well known dictum “Take careof the facts, and law will take care of itself”equally applies to matters connected with thedrafting of legal documents.

2. LEGAL PERFECTION:

The legal basis of the rights and obligation of theparties in respect of matters contained in a documentshould be based on clear, unimpeachable andunambiguous provisions of the relevant statutes andsupported by well accepted and estab-lished judicialpronouncements and precedents on these matters.

3. PRECISE EXPRESSION:

This is the most important aspect of drafting of documents. A well conceived transaction, bothfactually and legally can still get into serious trouble

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if the same is not properly documented in a preciselanguage form. The expressions used should bringout the intention of the parties clearly andunambiguously. The words and expres-sions usedshould neither be inadequate nor be superfluous orredundant. The language used should say what isshould mean and should mean what it says.

4. FORMAL STATUTORY COMPLIANCE:

For the legal document to have the requisite legalforce all the statutory formalities relating to stampduty, registra-tion, and statutory clearances, shouldbe fully complied with. In the matter of drafting,these aspects also should be taken into account. Forexample, a ‘Memorandum’ recording certain prior events relating to oral partition or a family arrange-ment involving immovable properties neednot be registered and the stamp duty payable thereonis only nominal. On the other hand, if the samepartition or family arrangement is effected through adeed directly, the stamp duty is substantial and thesame requires compulsory registration.

CHAPTER - 2I. DEFINITIONS OF CERTAIN TERMS RELATING TODOCUMENTS:

1. GENERAL

The document may be a mere agreement by whichparties agree to a future course of action betweenthemselves creating mutual rights and obligationsrelating to the same. It can also be a document which by itself creates, establishes, and defines rights,between the parties in relation to specific matters orproperties. It may be a mere memorandum recordingthe earlier events relating to an oral transactionpermitted under law. Depending upon these thedescription of a docu-ment has to be made and someof them are given below.

2. DEED:

The word ‘deed’ is normally understood to mean andinclude the following:

a) A written or a printed document betweenparties competent to contract under their hand (andsometimes seal)

b) A deed is to be distinguished from a will.

A deed is a document which deals with apresent interest and its passing of or transfer fromone person to another, al-though the right to itspossession and enjoyment may not occur till somefuture time. If on the other hand an interest or rightis passed on from one person to another by adocument to be effective on the death of the former,such a document is referred to as a will.

3. INSTRUMENT

Some of the definitions for the term instrumentwhich are normally followed are given below:

a) A writing given as the means of giving formalexpression to some act; a writing expressive of somecontract, process or proceedings, as a deed,contract, writ, etc.,

b) A formal legal writing as a means of evidencerecording all matters, mutual rights and obligationsbetween parties relat-ing to contract, property or anyother transaction or matter.

c) The term “Instrument” is defined in Section2(14) of the Indian Stamp Act, 1899 as follows:- ”Instrument” includes every document by which anyright or liability is or purports to be created,transferred, limited, extended, extinguished orrecorded.

4. INDENTURE:

Some of the definitions for this term are given below:

a) A deed to which two or more persons are parties and in which they enter into reciprocalobligations.

b) Indenture is a writing containing some contract,agreement or conveyance between two or morepersons.

5. MEMORANDUM:

In some cases an oral transaction, transfer orarrangement is permissible under the law eventhough it may deal with immova-ble properties. Insuch cases subsequent to the oral transac-tion, adocument styled as a Memorandum is executed

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between the parties to confirm and evidence the oraltransaction. The Memorandum by itself does notcreate any rights but only confirms the eventsrelating to the oral transaction. The Supreme Court has on a number of occasions held that such aMemorandum does not require registration. Theexamples in this regard are, Memorandum recordingevents relating to an oral partition, deposit of titledeeds in an equitable mort-gage and an oral familyarrangement.

6. AGREEMENT:

Section 2(e) of the Indian Contract Act, 1872defines an agreement as follows:

“Every promise and every set of promises formingthe consid-eration for each other is an agreement.”The term “promise” and the term “proposal” whichis referred to in the definition of promise as definedin the Indian Contract Act, 1872 are given below:

Section 2(a) : Proposal

“When one person signifies to another his willingnessto do or to abstain from doing anything with a viewto obtaining the assent of that other to such act orabstinence, he is said to make a proposal”.

Section 2(b) : Promise:

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said tobe accepted. A proposal when accepted becomesa promise”. Thus an agreement in writing is adocument which records such reciprocal promisesbetween parties.

7. AFFIDAVIT:

It is an unilateral declaration or a statement on oathmade by a person on any matter. Section 3(3) of theGeneral Clauses Act, 1897 defines “affidavit” asfollows:

“Affidavit” shall include affirmation and declarationin the cases of persons by law allowed to affirm ordeclare instead of swearing”.

An affidavit being an affirmation and declaration is

an impor-tant document which is binding on thedeclarant and the rules of estoppel are applicable.Section 115 of the Indian Evi-dence Act 1872recognises that when a person makes such anaffirmation on any act or omission on his part, he willnot be allowed to deny the truth of the same in anysuit or proceeding. An affidavit can be an usefuldevice by which declarations on oath by parties whoare not directly involved as parties in a document,can be obtained to the effect that they do not haveany right, interest or title in the properties covered in the document. As an affidavit is sworn before aNotary Public or a competent magistrate or a judicialofficer, there is consid-erable evidenciary value forthe same in respect of its con-tents. An Affidavitalso can be registered with Registration Authorities.Hence many oral acts or transactions could becon-firmed through affidavits which will have theeffect of a regular document.

8. POWER OF ATTORNEY:

It always happens that persons directly involved in atransac-tion as a party to a legal document is notable to directly participate in its execution orregistration. There are also cases where agency isgiven by a person to another in respect of numberof transactions including legal acts to be carried out by the Agent. In all such cases the person directlyinterested in the transaction or the document hasto give authority and powers to another through apower of attorney executed in writing and registeredor attested before a regis-tering authority or a judicialofficer as the case may be. When the power givenis in respect of a single act it is called a ‘SpecialPower of Attorney’. When it is in respect of a numberof acts whether relating to a single transaction or anumber of transactions, it is called a ‘General Powerof Attorney’. When a power of attorney is given forconsideration and to protect the interests of theperson to whom it is given, it creates an agencycoupled with interest and by virtue of the provisionsof Section 202 of the Indian Contract Act 1872 itbecomes irrevocable.

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CHAPTER – 3

GENERAL PRINCIPLES, RULES AND GUIDELINESRELATING TO INTERPRETATION ANDCON-STRUCTION OF DOCUMENTS

1. INTRODUCTION:

Before taking up a discussion on the precise modeand manner of drafting and the actual words andexpressions to be used in a legal document, a studyof certain working rules relating to interpretation ofdocuments becomes necessary to serve as a sound base and background for the drafting ofdocuments. These rules are given below.

2. TRUE INTENTION OF PARTIES:

A clear understanding of the true intention of theparties to a document is fundamental to thepreparation for drafting. Parties to a documentshould reach a perfect understanding betweenthemselves in respect of the subject matter of thetransaction entered into between them. Thereshould be a clear identity of views and a perfectmeeting of minds between the parties. The mattersagreed to between them should be understood byboth the parties in the same manner at the sametime, in the same sense. This is referred to as“Consensus ad idem”.

There should be such a consensus on all mattersagreed to between the parties.

The true intention of the parties and such consensus and identity of views between the partiesshould be properly and adequately reflected in thedocument itself. All matters of disputes andcontroversies, in respect of a transaction be-tween the parties have to be ultimately resolved only withreference to the true intention of the parties. Hence, a proper recording of such identity of viewsand the true inten-tion of the parties in thedocument itself is of paramount importance.

The primary rule of interpretation of documents is that the true intention of the parties should beascertained only with reference to the actual wordsand expressions used in a docu-ment. When thewords and expressions used in a document are

themselves clear and unambiguous, there is no roomfor finding out the true intention of the parties withreference to the facts and circumstances other thanwhat is evident from the document itself.

3. REFERENCE TO THE TRUE INTENTION OF THE PARTIES TO RESOLVE DOUBTS IN INTERPRETATION:

Whenever there is a doubt or a controversy relatingto the interpretation of a clause or a set of wordsand expressions used in a document and more thanone view is possible on the same, it should be resolved with reference to the true intention of the parties. Only an interpretation which is closer to the trueintention of the parties and which is likely tofacilitate the implementation of the transaction inthe manner intended by the parties should be adopted. An interpretation which is in conflict withthe true intention of the parties should be avoided.

4. WHERE LANGUAGE OF THE DOCUMENT IS TOPREVAIL:

However, when the words used in a document are themselves clear and unambiguous and are notcapable of more than one interpretation, then onlythe language used in a document will prevail andthere is no room for any reference to any assumedor implied intention of the parties. This being so, it isvery essential that the words and expressions used in a document are themselves clear and unambiguousand precise.

5. ORDINARY, NATURAL AND GRAMMATICALMEANING:

The cardinal rule of construction is to read the document by giving to the words and expressionsused therein their ordi-nary natural and grammaticalmeaning as is commonly understood between theparties similarly situated. Such an interpreta-tionshould be adopted even if it may appear to result inany apparent hardship or injustice.

6. WHEN SURROUNDING FACTS ANDCIRCUMSTANCES ARE RELEVANT:

However, when the words used in a documentthemselves are not clear and there is difficulty in

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ascertaining the true inten-tion of the parties fromthe same as to the matters agreed to between them, then the surrounding facts and circumstancesleading to, and forming the background of thetransaction may be looked into for ascertaining thetrue intention of the parties. Such facts andcircumstances as recorded and re-flected in thedocument itself should be referred in the first instanceand only then they are not so clearly recorded there-in, sources other than the document itself can belooked into and examined for this purpose.

7. DOCUMENT TO BE READ AS A WHOLE:

The entire document consisting of the preamble and various clauses should be read as a whole, to ascertainand understand the true meaning of the words usedin any part of the document and also to understandthe totality of the transaction and all matters agreedto between the parties relating to the same. Noclause or part of a document should be read in isolationor out of context. Where different clauses or sets ofwords and expressions used in a document are inapparent conflict with one another, only aninterpretation which resolves such appar-entinconsistencies and harmonises the same should beadopted

8. INTERPRETATION IN FAVOUR OF MAKING THECONTRACT WORKABLE:

When more than one view is possible, only an interpretation which will make the contractbetween the parties workable, ensuring its fair andsmooth implementation should be made.An interpretation which will result in absurdity, futility,undue hardship or gross injustice should be avoided.

9. RELEVANCE OF THE CONTEXT AND THEPRECEDING AND SUCCEDING WORDS ANDPHRASES:

The meaning of a word or an expression should beunderstood in the context in which it is used. Thewords and expressions used in the same clause whichare preceding and succeeding to the particular words,

should be read together to find out their true meaning.Similarly the preceding and subsequent clauses in adocument also have a bearing and should be lookedinto to resolve any doubt or ambiguity.

10. SPECIAL MEANINGS FOR LEGAL ANDTECHNICAL TERMS:

Well known legal and technical terms may be used ina document wherever it is necessary to do so.However such terms should be understood strictly inthe special meanings attached to them. In such casesordinary and popular meanings of such terms should be ignored. However, there should be a clearindication in the document itself to the effect that such terms are used only in the special meaningsattached to them.

11. RULE OF EJUSDEM GENERIS:

Wherever particular words belonging to a specific class, category or genus are immediately followedby words of a general nature, the general words sofollowing shall be under-stood only in the restrictedsense as to belong to such spe-cific category, classor genus to which the particular words belong. Inother words, the general words so following theparticular words cannot be given a wider meaningthan in which it is normally understood. This rule isknown as ”Ejusdem Generis”. For example in theexpression ‘white, red, blue or otherwise used in adocument, the word ‘otherwise’ should be understood to refer to any other colour only and not to anyother thing generally.

12. INTERPRETATION CONSISTENT WITH THELEGALITY OF THE TRANSACTIONS TO BECHOSEN:

Wherever more than one interpretation is possiblefor a clause or a set of words in a document, aninterpretation which is consistent with the legalityof the transaction must be cho-sen. An interpretationwhich will make the transaction unlawful or make itcome into conflict with any of the provisions of thelaw should be avoided.

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CHAPTER - 4

I. GENERAL GUIDELINES FOR DRAFTING:

1. GENERAL:

As discussed earlier, a transaction in immovable property normally deals with one or more of the typesof transfer like Sale, Exchange, Gift, Settlement, Trust, Mortgage, Lease, Easement, Licence, etc. Alegal document on such transfers should contain allmatters relating to persons and properties involvedin them. The drafting of such a document requires athorough prior preparation on the following lines.

2. PRIOR PREPARATION:

It is useful to prepare a detailed note containing thefollow-ing information:

a) TRANSACTION:

The transaction as a whole as conceived by and agreed to between the parties has to be clearlyunderstood. All the aspects relating to the samerelating to persons, properties and the legal formalitieshave to be thoroughly identified, analyzed andrecorded.

b) RIGHT, INTEREST AND TITLE TO PROPERTIES:

The details of various properties involved inthe transaction and the various rights, interests andtitles of various par-ties therein have to beascertained. The nature and extent of transfersinvolved in such properties have to be noted.

c) IDENTITY OF PARTIES

Parties to the transaction involved both directly and indi-rectly have to be properly identified withreference to their names, addresses, the names oftheir fathers, husbands, guard-ians, etc., as the casemay be, their lineal ascendants and descendants andother interested family members, if any. The legalstatus and authority of each one of them relating tothe persons and properties involved in the transactionalso have to be ascertained.

d) VERIFICATION OF TITLE:

Once the aforesaid information is obtained the titleto the properties in the hands of the present holder

has to be exam-ined and verified. In this regard thefollowing steps have to be taken:-

i) Original Owner: The original owner of theproperty at the earliest point of time has to be tracedand his title to the property should be verified withreference to relevant legal documents.

ii) Subsequent Events: This should be followed by athorough examination of events and transactions inan unbroken se-quence arranged in a chronologicalorder involving interme-diary parties between theoriginal owner and the present holder of theproperty, the transferor. Such an examinationshould cover all matters relating to succession, inheri-tance, wills, Settlements and other modes oftransfer like Sale, Mortgage, Lease, Easement,Licence, etc., involving such intermediary parties.

iii) Identity of parties: Identities of intermediaryparties and their family connec-tions if any whereverthey are relevant and the proceedings, if any,involving the parties and the properties concernedpending before courts of law, other legal forums andauthor-ities including tax authorities have to be identified and examined.

iv) Statutory Clearances: The nature and scope ofvarious clearances and sanctions to be obtained fromrelevant statutory authorities like Urban Land Ceiling,Income tax, Land Reforms, etc., for completing thetransaction have to be examined and steps are tobe taken for obtaining the same.

v) Steps to be taken: The various steps to be takenfrom the very inception till the completion of thetransaction, at different points of time to be carriedout by different persons connected to the transaction have to be listed. The specific acts, events and legalformalities to be carried out in this regard have to beidentified and set out in a chronological order.

vi) Matters relating to the Transaction itself: The following matters relating to the transactions itselfshould be ascertained.

a) Identity of the parties to the document and thelegal status and authority in which they function.

b) The nature of rights transferred and the mutual rights and obligations between the parties to beestablished.

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c) The consideration and the time schedule forthe payment of the same.

d) Penalties, sanctions and remedies for delays anddefaults by parties.

e) The mutual covenants and assurances betweenthe parties in relation to such mutual rights andobligations.

f) Matters relating to the verification of title deeds,and other connected papers and their custody.

g) Matters relating to statutory clearances

h) Matters relating to the possession to be handedover to the transferee.

i) Payment of stamp duty, registration and otherincidental expenses.

j) Identity and detailed description of properties withthe support of sanctioned plans, tax paid receipts,Khatha, etc.

k) All other matters not mentioned above which havea bear-ing on the transaction in monetary and legalterms.

l) The various points of time fixed for various matterswithin an overall time frame for completion of the transac-tion as a whole have to be recorded.

m) The various agreements, exchange of letters, memorandum of agreements or understanding,deeds, powers of attorney, affidavits, statements,etc., which have to be prepared and executed forthe completion of the transaction have to be listed.

CHAPTER - 5

A. BROAD FEATURES OF DEVELOPMENTAGREEMENTS:-

i. OWNER OF LANDS:-

A single owner or a group of co-owners own certainlands.

ii. CONVERSION:-

Such lands may be agricultural in nature and theyget ‘converted’ by suitable orders of the competentstatutory authorities for use for non agriculturalpurposes ie., for the development of sites, flats,apartments, townships etc.

iii. OFFER OF DEVELOPER:-

A property developer approaches the owners andoffers the following:-

a. To construct for the owners certain specifiedextent of built up area of flats/apartments togetherwith the right to use certain common areas, facilitiesand amenities.

b. In return for the same, the owner agrees tosell a specified share / percentage of undivided interestin the land to the prospective buyers nominated bythe developer.

iv. ACCEPTANCE AND EXECUTION OFDEVELOPMENT AGREEMENT:-

The aforesaid terms are accepted by the owners andin pursuance thereof the development agreementsare entered into between the owners and thedevelopers. Under these agreements the developerby himself does not purchase any immovable propertyfrom the owner and it is the prospective buyer whobuys a specified share of undivided interest in the landfrom the owner. Therefore these agreementsbetween the owners and the developer are purelycontractual and commercial in nature and hence theprovisions of Section 53-A of the Transfer of PropertyAct 1882 has no application since the developer byhimself is not a transferee / purchaser of anyimmovable property. Further, since these agreementsonly confer on the developer the right to enter uponthe property for the purpose of development and onlypermissive possession in the nature of a license asdefined under Section 52 of the Indian EasementsAct, 1882 is vested with the developer, it shall alsonot constitute transfer within the meaning of Section2(47) of the Income Tax Act, 1961.

v. POPULARLY KNOWN AS JOINTDEVELOPMENT:-

Even though it is the developer who develops theproperty and constructs the buildings, the abovearrangement is popularly known as “JointDevelopment”

vi. DEVELOPER TO NOMINATE BUYERS:-

The developer is authorized to exclusively nominatethe prospective buyers and enter into agreements

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with them fixing the sale prices and considerationpayable to the developer in respect of the DevelopersArea.

vii. G.P.A TO DEVELOPER:-

The developer is empowered through a GeneralPower of Attorney (GPA) by the owner to act on theOwner’s behalf and agree to sell certain specifiedshares of undivided interests in the land forming apart of the developer’s area to the prospective buyersat the aforesaid prices fixed for this purpose. AGeneral Power of Attorney given by the Owner to aDeveloper constitutes only an authority given to aDeveloper to act for and on behalf of and in the nameof the Owner. No title in the immovable property orright to have possession of the property is conferredon the Developer in any manner whatsoever.

Related Case Laws:-

Agency Expressly made Irrevocable:-

In the case of Corporation Bank vs. Lalitha H Holla,AIR 1994 KANT 133 and M John Kotaih vs. ADivakar, AIR 1985 AP 30 it has been held that mereuse of the “irrevocable” in a power of attorney doesnot make it so, unless the terms disclosed that itcreated an agency coupled with interest in favour ofan agent.

Interest in Property:-

In the case of Her Highness Maharani ShantideviP Gaikwad vs Savjibhai Haribhai Patel AIR 2001SC 1462,(2001) 5 SCC 101, it has been held thatinvolved a development agreement between anowner and a developer for development of a largetract of land into a housing scheme complying withthe Urban Land Ceiling Act. A power-of-attorneyexpressly made irrevocable was also made by theowner in favour of the developer. Holding that theagreement was validly terminated under terms of theagreement, the court observed that “Section 202 hadno applicability”; thus making powers under thepower-of-attorney subservient to the terms of theagreement. The court also observed that “It is not acase of agency coupled with interest. No interest canbe said to have been created on account of plaintiff

being permitted to prepare the scheme and takeancillary steps”.

In case of Vipin Bhimani vs Sunanda Das, AIR 2006Cal 209 and in Nirmalabai D Kale vs Madan BalajiRatan, AIR 2009 Bom 69, it was held that anagreement to the developer under which he willdevelop the land does not create interest in theproperty to be developed. Such contract itself can beterminated under circumstances. Hence, a power-of-attorney given to a developer for giving effect to anearlier agreement of development is not coupled withinterest, and is not irrevocable.

In the case of Vipin Bhimani vs Sunanda Das AIR2006 Cal 209 it was also held that “ if a GeneralPower of Attorney is stated to be irrevocable in thedocument and is revoked, the agent can claimcompensation”.

viii. NO POWER GIVEN TO DEVELOPER TOEXECUTE SALE DEEDS AND POSSESSION TOPROSPECTIVE BUYERS BEFORE SALE:-

Under the Development agreement and the GeneralPower of Attorney, necessary clauses are inserted toensure that the Developer is not given any power toexecute sale deeds in favour of the prospective buyersor hand over possession of the Developers area tothem unless and until the Developer completes theconstruction of the specified built up area of flats /apartments for the Owner as per the agreedspecifications and dimensions, and hands overpossession of the same to the owner with ‘occupancy’rights (being granted by the competent statutoryauthorities). Only after the Developer complies withthe above obligation, the Owner gives a separateGeneral Power of Attorney to the Developer toexecute and register the sale deeds on Owner’s behalfto and in favour of the prospective buyers in respectof the Developers Area. At no stage before the actualsales are effected, the prospective buyers are put inpossession of the flats / apartments sold to them.

ix. DEVELOPER’S RIGHT TO ENTRY IS ONLY‘LICENCE’ – NOT POSSESSION:-

It will be specifically provided that the developmentand construction and such right of entry is only a

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Licence coming within the purview of the provisionsof Section 52 of the Indian Easements Act 1882. Itwill be clearly provided and recorded that the legaland physical possession of the property shall only bewith the owner till the same or parts thereof are soldto the prospective buyers.

The Developer is only permitted to enter the propertyfor the purpose of development. The Developer notbeing the purchaser or a transferee, the provisions ofSection 53-A of the Transfer of Property Act 1882have no application and the aforesaid right of entryto the Developer constitutes permissive possessionunder a ‘Licence’ coming within the meaning of theterm under the aforesaid Section 52 of the IndianEasements Act 1882 and the same does not amountto a transfer within the meaning of Section 2(47) ofthe Income Tax Act 1961.

x. SEPARATE AGREEMENTS FOR FLATS /APARTMENTS:-

The developer enters into separate agreements withthe prospective buyers for the sale of the DevelopersArea fixing the sale price and consideration payableby them for the same.

xi. REGISTRATION OF AGREEMENTS – BENEFITSAVAILABLE

The development agreements entered into by theOwners with the Developers can be registered withthe appropriate registration authorities of the StateGovernment under the Registration Act 1908, andthey will get the benefit of entry into Book-Imaintained in the Registrar’s Office. Such entry willensure that there is ‘public notice’ to these documentsand their contents. Whenever any encumbrancecertificates are obtained on the concerned immovableproperties, there will be entries recording theexecution of the development agreement. TheGeneral Power of Attorney (GPA) given to adeveloper by the owner can also be registered in thesame manner and the same will be entered in BookIV maintained at the Sub Registrar’s office. Whenthe fact of this G.P.A is recorded in the developmentagreements, there will be ‘public notice’ to the G.P.A

also.. As the G.P.As are given to the developer for‘consideration’, these G.P.As will become irrevocableas it will be treated as creating an agency coupledwith interest to come within the purview of theprovisions of Section 202 of the Indian Contract Act1872. There will be a suitable clause in the G.P.A toindicate that the same is irrevocable.

xii. STAMP DUTY AND REGISTRATION FEES:-

The total cost of stamp duty and registration feepayable on these documents is very nominal in mostof the States of India whereas in Karnataka theschedule to the Karnataka Stamp Act provides asfollows-

a) As per article 5(f) of the Schedule to theStamp Act, the stamp duty leviable for registration ofthe development agreement would be at 2% of themarket value of the undivided share or portion of landor immovable property, consideration and moneyadvanced if any.

b) As per article 41 (ea) of the Schedule to theStamp Act, the stamp duty leviable for registration ofthe GPA given to the Developer in pursuance of thedevelopment agreement would be 2% of the marketvalue of the undivided share or portion of land orimmovable property, consideration and moneyadvanced if any.

However, it has been provided that in case of boththe above documents being executed between thesame parties in respect of the same property, thenthe stamp duty payable on the GPA or thedevelopment agreement would be the maximum ofRs 200/- only provided the full stamp duty has beenpaid on either of the documents mentioned above. Ithas also been clarified in both cases that the term“money advanced” would include refundable andnon refundable deposit given by the Developer to theOwner.

Apart from the above, the registration fees payableon the aforesaid documents is 1% of the Marketvalue of the property in question subject to maximumof Rs.1,50,000/-.

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xiii. STAMP DUTY AND REGISTRATION FEE INOTHER STATES:

It is interesting to note the following facts about thestamp duty and registration on DevelopmentAgreements in the State of Tamil Nadu which are asfollows-

● Stamp Duty payable for any agreement includingJoint Development Agreement is Rs. 20/-

● Stamp Duty on all types of Power of Attorney if Rs.100/-Registration fees payable on the Power ofAttorney executed among the family members is Rs.1,000/- and if the same is executed in favour of thirdparty (including the Developer) the registration fee isRs. 10,000/-

It is interesting to note the following facts about thestamp duty and registration of DevelopmentAgreements in the State of West Bengal

● Stamp Duty as per Article 5(f) would depend on themarket value of the property and the maximum dutystipulated is Rs. 75,000/- where the market value ofthe property exceeds Rupees Three Crores.

● The stamp duty payable as per Article 48(g) inrespect of the Power of attorney given to a Promoteror a Developer in pursuance of the Joint Developmentagreement would be a maximum of Rs. 25,000/-where the market value of the property exceedsRupees Three Crores. However, in the explanationbelow this Article it is clearly provided that if properstamp duty is paid under Article 5(f) between the sameparties for the same property, the stamp duty underthis clause shall be only Rs. 50/-

B. MAIN POINTS RELATING TO TAXATIONHIGHLIGHTED:-

i) The Developer is not a Transferee / Purchasercoming within the purview of Section 53-A of theTransfer of Property Act 1882.

ii) The Developer does not buy any land orproperty from the owners.

iii) The right to develop the property granted toa developer as provided in the developmentagreement does not constitute a contract to a transferof any immovable property as between the owner

and the developer, to attract the provisions of Section53-A of the Transfer of Property Act 1882 betweenthem.

iv) The Developer only nominates the prospectivebuyers.

v) The Developer enters the property only forthe purposes of development of the property and notas a purchaser / transferee.

vi) The G.P.A given to a developer is only to enterinto agreements with the prospective buyers for andon behalf of the owner and not for executing thesale deeds. There will be a restrictive clause in theG.P.A to this effect.

vii) Only the prospective buyers are thepurchasers / transferees in respect of the flats /apartments purchased by them together with thecorresponding shares of undivided interests, rights andtitles in the land.

viii) The prospective buyers of flats / apartmentsare never put into possession of them before the saledeeds are executed and registered in their favour andhence there is no scope for invoking the provisions ofSection 2(47)(v) read with Section 45 of the Incometax Act 1961 and the provisions of Section 53-A ofthe Transfer of Property Act 1882.

ix) It is only the developer who develops the landsby the construction of flats / apartments together withcommon ways, infrastructure, amenities and facilitiesboth for the owners of lands as well as for theprospective buyers of flats / apartments and his profitmargins is assessable as business income.

x) In the hands of the owners, the chargeabilityto tax the gains made by them will be treated asfollows:-

a. Only as and when the flats / apartmentsconstructed by the developer on the developers shareof land are sold/transferred to the prospective buyers,the chargeability to tax on capital gains will arise onthe owners in the years in which such sale/transfertakes place. The consideration for the sale of thedevelopers share of land will be equal to the cost ofthe flats / apartments built by the developer for the

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owners. On the occupancy of these flats / apartmentsbeing given to the owners after the completion ofthe construction of the same as per the specificationsand dimensions mutually agreed to between theowners and the developer, the consideration to begiven to the owners becomes fully discharged.

b. When the owners get more flats / apartmentsthan what they can personally use and occupy, theyeffect sales of such additional flats / apartments.When such sales are made the following position willemerge.

c. If the sales are made within three years fromthe date when occupancy was given to the owners,the further gains made by them on sale of the superbuilt up area will be treated as short term capital gainsand if the sale of the super built up area is effectedafter a period of three years after taking possession,the gains will be treated as long term capital gains.However, it is to be noted that the consideration forthe sale of undivided share of land relating to theowners share of apartments will be taxed as long-term capital gains only as the same were always heldby the owners and transferred at any time to thedeveloper or his nominees.

d. Where the owners retain one flat each out ofthe total number of apartments allotted to themtowards their share, each of them will be entitled toclaim exemption under Section 54F of the Income taxAct on the cost of construction of such retainedapartment, subject however to other conditions underSection 54F being fulfilled by them.

e. The incidence of tax on joint developmentagreement have been dealt with in the decision ofVasavi Pratap Chand vs. DCIT (2004) 89 ITD 73(Delhi Tribunal) and in the case of Tej Pratap SinghVs Asst CIT (2010) 127ITD 303(Del H Trib) whichcan be referred to.

Reference can also be made to the decisions of theBangalore Tribunal in the cases of

D.L.Nandagopal Reddy Vs ITO Ward 7(2) dated 28th

June 2006 an JCIT(Asst)(Spl Range 6)Vs Dr T.K Dayalu(ITA No 610 /Bang/2001 dated 23-6-05)

Dnyaneshwar N Mulik vs ACIT (ITAT Pune) (2005)98TTJ (Pune) 179

However it is pertinent and relevant to state thatinspite of all the basic concepts mentioned aboveindicating that there cannot be a “transfer” on thedate of entering into the joint developmentagreement, a spate of decisions rendered by variouscourts and tribunals which are detailed elsewhere inthis paper , have held that there is a “transfer” tothe extent of the developers share in the land as onthe date of entering into the Joint Developmentagreement itself, making it all the more necessary tofind innovative ways of entering into jointdevelopment of properties.

C. OWNERS CAN CONVERT THE LANDS INTOSTOCK-IN-TRADE:-

i. It is possible for the owners to treat their landsas stock-in-trade of a business in propertytransactions carried on by the owners before theyenter into development agreements with thedevelopers. Such conversion of their capital assets(lands) into stock-in-trade can be evidenced bysuitable entries in the books of accounts of the ownerssupported by other contemporaneous documentsexecuted like sworn affidavits etc. It will only be anatural course of action to be adopted by the ownersas the owners will invariably be left with such surplusflats / apartments as mentioned above and sales ofthe same have to be made on commercial basis only.

ii. In such cases only the provisions of Section2(47)(iv) read with Section 45(2) come into operationand there is no scope for invoking provisions of Section2(47)(v) and (vi) or any reference being made toSection 53-A of the Transfer of Property Act 1882through Section 2(47)(v). The profits and gains arisingout of such conversion into stock-in-trade will begoverned by the provisions of Section 45(2). Thiswould mean that the capital gains arising to theowners on the date of such conversion to stock-in-trade will get quantified at that stage itself but itschargeability to tax will arise only when sales ortransfers otherwise of such stock-in-trade take placesubsequently. It should be clearly noted that such

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subsequent sales or transfers otherwise will be ofstock-in-trade only and provisions of Section 2(47)cannot be invoked for such subsequent sales ortransfers of stock-in-trade.

iii. In the case of R Gopinath (HUF) Vs ACITITA Nos 29&30/Mds/2008 rendered by the ITATChennai ‘A” Bench on 24-7-2009 reported in(2010) 5 taxmann.com 80 ,the tribunal has on anidentical set of facts as in my case, held that Section2(47) has no application and that the taxability in thecase of conversion or treatment into a stock in tradewill arise only in the year when such stock in trade issold or otherwise transferred

iv. The Mumbai Tribunal (D Bench) has in thecase of Ramesh Abaji Walavalkar Vs Addl CIT 150TTJ 725 rendered on 22-6-2012 –ITA Nos 852/Mum/2009 and 1534/Mum/2010 held hat in a casewhere the assessee converted the land held by himas a capital asset into stock in trade and then enteredinto a development agreement, the capital gainswould arise only in the year when the possession ofthe Owners share is given to him post development.This decision has also confirmed the analogy thatSection 2(47)(v) would have no application insuch a case. While rendering the decision thetribunal has also referred to the decision ofVidyavihar Containers Ltd Vs Dy CIT (2011) 133ITD 363(Mumbai Tribunal) which had heldsimilarly on near identical set of facts.

v. The profits and gains earned on subsequentsales effected by the owners of their surplus flats /apartments (other than what are kept for their ownuse) will be taxed as business income only. In thenormal course, these sales would have been madewithin a period of three years from the date ofcompletion of the project and they would have beensubjected to tax as “short term capital gains” onlyand the tax incidence would have been the same onthe owners.

It is to be noted that the above treatment of lands ofthe owners as stock-in-trade will avoid all the risksand problems arising out of such interpretations thatan agreement to sell by itself constitutes a ‘transfer’within the meaning of Section 2(47)(v) read with

Section 45 of the Income tax Act 1961 as held by theBombay High Court in the case of CharturbujDwarakadas Kapadia Vs CIT (2003) 260 ITR 491(Bom). There will be no scope for invoking theprovisions of Section 2(47)(v) and (vi) in such cases asthey will be governed by the provisions of Section2(47)(iv) read with Section 45(2) only.

vi. The Karnataka High Court has vide itsjudgement rendered on 20th June 2011 in the caseof CIT Vs Dr T K Dayalu in ITA No 3209 of 2005 C/W ITA No 3165 of 2005 held that the “transfer” asfar as the Owner is concerned takes place on thedate of entering into the development agreement onthe ground that possession given to a Developerwould also fall into the ambit of the definition of“transfer” u/s 53A of the transfer of Property Act1882 r/w Section 2(47)(v) of the Income Tax Act. Thisjudgement with due respect seems to be flawed as ithas not considered the basic fact that the possessiongiven to a Developer is permissive possession andcannot be construed as a possession given in partperformance of a contract of the nature referred toin Section 53A of the Transfer of Property Act.

vii. It is to be noted that the Karnataka HighCourt has in the case of CIT and Others Vs H BJairaj(2012)43(I) ITCL 85 in ITA No 20 of 2005 C/WITA No 21 of 2005 rendered on 16th September2011,held that the date of entering into theDevelopment agreement should be reckoned as thedate of “transfer’ of land to assess the Capital Gainsarising to the Owner, thereby confirming the principlelaid down in Dr TK Dayalu’s decision as above andhas further followed the said principle in the case ofCIT Vs Ved Prakash Rakhra (2012) 210 Taxman 605Karnataka: (2013) 256 CTR (Karn) 285. The analogyof the Karnataka High Court in the case of Dr.T.K.Dayalu and H.P.Jayaraj (Supra) has been followed bythe said court in the case of Smt. Prameela Krishnanvs. Income Tax Officer, Ward -1(2) Mysore videjudgement dated 18/11/2013 reported in [2014]42 taxmann.com 185 Karnataka and (2014) 221Taxmann 418(Kar)

viii. However, it is equally disturbing to note thatthe Hyderabad Tribunal in the case of ACIT Vs A Ram

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Reddy(2012) 23 Taxmann.com 59 and reported in52 SOT 521 (Hyd B Trib )has held that the date ofentering into the development agreement is the dateregarded as “transfer” u/s 2(47)(v) of the Income TaxAct 1961, as the Developer has got general controlover the property to use it for the intended purposebased on the earlier judgement of the HyderabadTribunal in the case of Dr Maya Shenoy (2009)124TTJ 692(Hyd) and that of the Bombay High Courtin the case of of Charturbuj Dwarakadas KapadiaVs CIT (2003) 260 ITR 491 (Bom). The decision inthe case of Ram Reddy (supra) has been furtherfollowed by the Hyderabad Tribunal in the case ofKrishnakumar D Shah (HUF) vs DCIT(2012) 23taxmann.com 111 and in the case of RavinderSingh Arora vs ACIT 10(1) Hyderabad renderedon 20th of July 2012(ITA Appeal Nos 58&355(Hyd)of 2011 and in the case of Mrs Durdana KhatoonVs ACIT(2013) 24 ITR 55(Hyd B Bench) renderedon 5-3-2013.

ix. The recent decision of the Andhra PradeshHigh Court in the case of Potla Nageswar Rao VsDCIT IITA 245 of 2014 rendered on 9-4-2014reported in (2014) 365 ITR 249 (AP) also supportsthe view adopted in the above cases.

x. It is interesting and relevant note that the HighCourt of Bombay at Goa has in the case of CITKarnataka (Central) Bangalore v Shri Sadia Shaikh(Tax Appeal No. 11 & 12 of 2013) rendered on 2nd

December 2013 reported in (2014) 56(I) ITCL 147(BOM- HC) has held that possession given to adeveloper in pursuance of a Development Agreementcannot be regarded as a transfer under section 2(47)of the Income Tax Act read with section 53A of theTransfer of Property Act. The court seems to havebased its decision on the fact that the entire controlof the property, the license to construct on theproperty and the occupation certificate was given onlyin the name of the owner of the property.

xi. Further, it is of significant interest to note thatthe Hyderabad- A Bench has in the case of RanjithReddy Vs Dy CIT (Hyd) Circle 6(1) in ITA Nos.290,292,336/Hyd/2012/rendered on 7/6/13reported in 144 ITD 461 (Hyd “A” Trib) held that

there is no transfer as defined under Section 47 (2)(v) of the Income Tax Act read with Section 53 A ofthe Transfer of Property Act in the case of anagreement in the nature of Joint Development as onthe date of signing the agreement, if there has beenno progress or construction since the signing of thedevelopment agreement. While rendering this decisionthe Tribunal has clearly distinguished the decisions ofCharturbuj Dwarakadas Kapadia Vs CIT (2003) 260ITR 491 (Bom) and Dr Maya Shenoy (2009)124 TTJ692(Hyd) (Supra). The Chennai”D” Tribunal in thedecision of Smt Sowcar Janaki v ITO (2013 27 ITR(Trib) 226 has also recognized the analogy of theHyderabad Tribunal.

xii. Further the Hyderabad Tribunal in case ofFibars Infratech Pvt. Ltd vs. ITO Ward 1(2) Hyderabad(ITAT Hyderabad), ITA. No. 477/Hyd/2013, Date ofpronouncement: 03.01.2014 has also held thathanding over possession of the property is only oneof the condition for invoking sec 53A of the Transferof Property Act and is not the sole and isolatedcondition. The developer i.e. the transferee shouldbe ready and willing to perform his obligation underthe terms of the agreement and should have donesome act, deed or thing to indicate the willingness.When there was a factual finding that the builderhad not even commenced construction in the A.Y. inquestion the provisions of sec 25(47)(v) of the IncomeTax Act read with section 53 A of the Transfer ofProperty Act cannot be invoked. While rendering thisdecision the Tribunal has taken note of the decisionsin the case of Chaturbhuj Dwarkadas Kapadia, JasbirSingh Sarkaria, Maya Shenoy and Dr T K Dayalureferred to elsewhere in this article. The said decisionhas further been followed in the case of ABVS PrakashVs The Asst CIT Hyderabad Central Circle – 1 ITA No462/Hyd/2013 rendered by the ITAT Hyderabad “B”Bench on 27-2-2014 and in the case of BinjusariaProperties (P) Ltd Vs ACIT (2014) 45 taxmann.com115 (Hyd Trib) also reported in (2014) Tax Pub (DT)2438(Hyd “B” Trib)

The above decisions could be the life line onwhich the Owners of properties who haveentered into Joint Development Agreements can

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depend upon to postpone the incidence ofCapital Gains till the date on which the Developerenters the property to commence constructionactivity as per the terms of the Developmentagreement.

xiii. Other case laws to be referred to pertainingto the taxation issues relating to Joint DevelopmentAgreements are as follows:-

● CIT V G Saroja(2008)22(i) ITCL 328, 301 ITR124(Mad)-No registration or possession given-Taxableevent does not happen till such time

● CIT Vs Attam Prakash & Sons (Del HC) ITReference Nos 250-251 0f 1988 – delivered onAugust 8, 2008-Mere grant of permissive right toBuilder does not amount to “Transfer”.

● CIT-I vs Naju Daru Deboo (2013) 38taxmann.com 258(All), 218 Taxmann 473(All)rendered 16-9-2013- Capital gain as a result of ajoint development agreement can arise only at thepoint of receipt of consideration by the Owner andnot on the date of entering into the JointDevelopment Agreement.

● Vijaya Productions P Ltd Vs Addl CIT (2012) 14ITR (Trib) 614(Chennai), (2012) 134 ITD 19(ChennaiTrib)™: 144 TTJ 1 (Chennai Trib)- Date of enteringinto the agreement cannot be regarded as the dateof transfer where the consideration is paid to thedeveloper by way of allotment of shares in a JointVenture Company incorporated between the LandOwners and the Developers.

● CIT V/s Eastern Ceramics Ltd (2013) 54(I) ITCL216 (Bom HC), 219 Taxmann.com 68/219 Taxmann66 (Mag) (Bom)- Date of entering into JD cannot beconsidered as transfer as the Owner was restrainedfrom handing over possession to developer on courtorders and that no construction activity took place inthe year of the JD agreement.

● Jasbir Singh Sarkaria (2007) 294ITR 196(AAR)-Date of entering into JD agreement is the date forthe purpose of “Transfer”.

● CIT(A)-I, Hyderabad in the case of B. NarasimhaReddy for the assessment year 2008-09 in ITA Nos.0348/CC-6, HYD/CIT(A)-I/09-10 dated 7.1.2011(Hyd

Tribunal)-Date of entering into the Developmentagreement is the date of “transfer”.

● Azad Zubarchand Bhandari Vs Asst CIT(2013)58 SOT 347 (Mum ‘A” Trib)- Date of handing overpossession to the Developer in pursuance of enteringinto a JD agreement is the date of transfer u/s 2 (47)(V)read with Section 53 A of the Transfer of PropertyAct 1882,

● Taher Alimohammed Poonawala v. Addl. CIT[2009] 124 TTJ (Pune) 387- ITAT Pune Bench-Dateof entering into the development agreement is thedate of “transfer”

● Ms Rubab M KazeraniV Jt CIT(2005) 2(II) ITCL456(Mum-Trib)(TM) and reported in(2004)- 91 ITD429(Mum-Trib)- Date of entering into thedevelopment agreement is the date of “transfer”

● ITO Vs Vikash Behal (2010) 34(II) ITCL 73 (Kol“C” Trib)- Date of entering into the developmentagreement is the date of “transfer”

● Mahesh Nemichandra Ganeshwade Vs ITO(2012) 17 ITR 116(Pune A Bench) (2012)147TTJ 488-Date of entering into the development agreement isthe date of “transfer”.

● G Sreenivasan V Dy CIT (2013) 140 ITD 235 (Coch-Trib)- Date of entering into the developmentagreement is the date of “transfer”.

● R Kalanidhi Vs ITO (2009) 314 ITR (AT) 266(Chennai-ITAT)- Date of entering into thedevelopment agreement is the date of “transfer”.

● DCIT Vs Jai Trikanand Rao (2014)149 ITD 112(Mum J Trib)- Date of entering into the developmentagreement is the date of “transfer”.

● The Hyderabad Tribunal in the case of K Radhikavs DCIT Central Circle rendered on 9th September2011 reported in 13 Taxmann .com 92 and 149 TTJ736(Hyd) has held that there is no “transfer” in thecase of an Owner as on the date of signing of theDevelopment agreement after elaborately analyzingthe provisions of Section 2(47)((v) and (vi) of theIncome Tax Act and also agreeing with the contentionthat the possession given to a Developer is only apermissive possession and not a possession given in

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part performance of a contract of the nature referredto in Section 53A of the Transfer of Property Act 1882.However subsequent decisions of the same tribunalreferred above have taken a contrary view on thematter.

xiv. In Vaswani Estates and Developers VsState of Karnataka 971/1006/2011 rendered on14-10-2011 under KVAT , the High Court ofKarnataka has held that Joint Development is a barteri.e the construction cost incurred by the Developeron the Owners share of built up area is theconsideration in kind for transfer of Developers sharein land by the Owner.

The said principle has also been upheld by the DivisionBench of the Karnataka High Court in the case ofOzone Properties Private Limited Bangalore VsThe Additional Commissioner of Sales Tax Zone1 Bangalore rendered on 9th November2011(2012)(72) Kar LJ 15 (HC) (DB).

The recent decision of the Supreme Court in the caseof L&T and Another Vs State of Karnataka andAnother (2014) 1 SCC 708 which was long awaitedand rendered on 26th September 2013 has howeverlaid out various principles on the applicability of VATon works contract in relation to construction activitiesand sale of immovable property and Para 111 of thesaid judgment specifically deals with transactions inthe nature of joint development. The decisions of theKarnataka High Court in the cases referred abovemay stand diluted with the decision of the apex court.

xv. Applicability of Section 50C to Transfer ofDevelopment Rights

It has been held by the Mumbai Tribunal in the caseof Sri Akhtar Hussain Vs ITO ITA No 541 of 2010and ITA No 706 of 2010 reported in (2011) 140TTJ 413 that the provisions of Section 50C areapplicable to transfer of Development Rights also asthey fall within the deeming provisions of Section 2(47)relating to transfer. A similar ruling has been given bythe Mumbai Tribunal in DCIT vs Jai Trikanand Rao(2014) 149 ITD 112 (Mum J Trib), in the case ofChiranjeev Lal Khanna v ITO (2011) 132 ITD 474,(2012) 144 TTJ 607 (Mum) and in the case ofArlette Rodriques vs ITO (2011) 39(II) ITCL 328.

C. ALTERNATE STRUCTURES TO BE EVOLVED

Taking into consideration the various factors includingthe levy of stamp duty on Developments agreementsand the Power of Attorney incidental thereto, theineligibility for set off on subsequent sales to theultimate customers, the various judicial decisionsreferred to above which seek to prepone the incidenceof tax on the land owner even before he receives theconsideration for development of land, the incidenceof service tax and VAT on the Owners Super BuiItArea being constructed by the developers in lieu ofthe undivided/divided share of land being conveyedto the Developers and/or their nominees, it is forprofessionals like us to put on the thinking caps andevolve a suitable structure which could minimise theimpact of the above.

I am detailing below a few options which could beexplored in the case of potential Joint Development/s.

1) Formation of a partnership firm between theland Owner and a Developer

The above methodology could be adopted ideally incases where a development is conceptualised on arevenue sharing model that is where there is noidentifiable area between the Land Owners andDeveloper post development and where theagreement is to share the gross revenues other thantaxes and deposits between the land Owner andDeveloper in an agreed ratio.

This scheme is conceptualised as follows:

i. The land Owner contributes the immovableproperty in to partnership firm at a value which isequivalent to the indexed cost of the immovableproperty based on the Cost Inflation Index. On suchvalue being recorded in the books of the firm therewould be no incidence of Capital Gain tax on the landOwner. The contribution of immovable property intothe firm would be in accordance with Section 14 ofthe Indian Partnership Act 1932 and would thereforebe recognised and treated from thereon as the firm’sproperty.

It is to be noted that the act of contribution of animmovable property in to the firm does not requireregistration as mentioned earlier elsewhere in this

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article. However as a matter of prudence andpracticality it would be preferable to make thepayment of registration fee of 1% as prescribed underthe table of registration fees issued under Section 78of the Registration Act, 1908 and register the propertyin the favour of the firm so as to enable and entry inBook 1 maintained by the Sub-Registrars under theRegistration Act, 1908. This would help in securing abetter title to the property and in getting the Khataof the property transferred in the name of the firm.

ii. The Developer should also become a partnerin the said firm by making his initial financialcontribution as agreed upon.

iii. It is to be clearly provided in the partnershipdeed that the entire cost of construction of thedevelopment would be borne by the Developer.

Further the clause on profit sharing would be wordedin a manner so as to ensure that the land Ownerwould be entitled to draw as profits, a fixedpercentage of the gross revenue exclusive of VAT andService Tax and deposits less the proportionateIncome Tax to be borne by him. Similarly it would beprovided that the Developer would be entitled to drawas profits, a fixed percentage of the gross revenueless the construction cost less the proportionateIncome Tax payable borne by him excluding VAT andService Tax and deposits.

iv. The Developer would be giving an unbridledright as a partner of the firm to all acts, deeds andthings necessary for the purpose of development ashe would have done as a power of attorney holderunder conventional development agreement.

v. The firm would have a common bank accountreferred to as the principal bank account for thecollection of revenue i.e the instalments towardsconsideration from the buyers including moneystowards taxes and deposits.

The share of revenues attributed to the Ownerexcluding the amounts received towards Service Taxand VAT, Deposits etc will be transferred understanding instructions to the bank to another bankaccount opened in the name of the firm to beexclusively operated by the owners from which the

Owner would be entitled to draw his share of revenue/profits as the case may above.

The Developer would either continue to spend forthe development of the property from the saidprincipal bank account or transfer his share ofrevenues to an another designated bank accountopened in the name of the firm from which the entireconstruction cost and other relevant expenses wouldbe defrayed.

The VAT, Service Tax and deposits collected from timeto time would be left in the principal bank account ofthe firm and paid to the respective statutoryauthorities and bodies as per time lines prescribed.

vi. The partnership deed would also have aspecific indemnity clause between the partnersindemnifying each other of possible ill effects on thefirm in the event of their partnership share beingattached or affected due to losses incurred by themin business/es other than that of the firm.

vii. The clause on dissolution would be worded ina manner so as to ensure that the land reverts backto the partner who has originally contributed it ascapital contribution on dissolution until a threshold limitof cost incurred on development is reached by theDeveloper. The rights on the land at various stages ofdevelopment in the event of dissolution can bedetailed in the partnership deed.

viii. The firm would then convert and treat theimmovable property introduced by the Owner whichwas a Capital Asset in his hands as capital contributioninto the firm as mentioned above into stock in tradein its books. This event could be timed to besimultaneous with the approval of sanction plans,other permissions, clearances, etc obtained for theproject.

This would ensure that the tax on the profits out ofthe development would get taxed as Capital Gainsand Business income only at the point when suchstock in trade is sold or otherwise transferred underthe specific provisions of Section 45(2) of the IncomeTax Act.

This would also be in line with the revenue recognition

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as mandated under AS 9 issued by Institute ofChartered Accountants of India.

Under the above scheme as there is no transfer ordeemed transfer of immovable property by the Ownerin favour of Developer during the period ofdevelopment and as there is no necessity for a Powerof Attorney to be given to the Developer as wouldhave otherwise been done in a conventionaldevelopment agreement, the ramifications arising outof the change in stamp duty law and the adversejudicial tax decisions mentioned above would bepractically eliminated.

2) Formation of a Limited Liability Partnershipbetween the Owner and the Developer

As a partnership suggested above could involve theeffect of unlimited liability being foisted on the firmand possibly its other partners, in case the Ownerand Developer do not have a credible knowledge ofeach other’s background it would be preferable toform a Limited Liability Partnership as against aPartnership firm suggested above.

However, as a Limited Liability Partnership is differentlegal entity and as there is no provision similar toSection 14 of Indian Partnership Act, 1932 thecontribution to immovable property as capitalcontribution by the partners of a limited LiabilityPartnership could be possible only through aregistered conveyance thereby involving stamp dutyand registration charges. It should be examined as towhether an LLP would be treated as a firm under theStamp Act and Rules.

The other aspects which could affect the schemeevolved as in the case of a Limited Liability Partnershipsuggested above would be as follows:

a. Under the Limited Liability Partnership Act, thevalue of the property brought in as capital contributionby the partners to be recorded in the books of LimitedLiability Partnership would be described under theLimited Liability Partnership Rules as specificallyprovided u/s 32(2) of the Limited Liability PartnershipAct.

As per Rule 23 (2) of the Limited Liability PartnershipRules, 2009 the value of contribution of the immovable

property would be as determined by a practicingChartered Accountant/Cost Accountant/ ApprovedValuer from the panel maintained by the CentralGovernment. Consequently, there could be incidenceof capital gains u/s 45(5) of the Income tax Act, 1961in the initial stage itself. It is to be noted that thedefinition of “Firm” u/s 2(23) of the Income Tax Actincludes a Limited Liability Partnership as defined inthe Limited Liability Partnership Act, 2008 (6 of 2009)and definition of a “Partner” shall include a partnerof a Limited Liability Partnership..

b. There is no specific provision to register aLimited Liability Partnership under Part IX of theCompanies Act, 1956 and the possibility of thismethod is being evaluated and yet to evolve, but ona plain reading of the relevant enactments iseminently possible.

The other steps mentioned in the case of a firm inPara A above would equally be applicable to a LimitedLiability Partnership.

c. There could also be an impediment forimmediate conversion of a firm into an LLP as althoughthere is no stipulation in the LLP Act or LLP Rules,there is a mention in Form No 17 which is a part ofthe procedure for conversion of a firm to an LLP, thatthe firm should have been in existence for atleast onefinancial year and that a no objection certificate shouldbe obtained from the Income Tax Authorities alongwith the application.

3) Developer to act as a contractor

Under this method the land owner would bestow theconstruction of the entire super built area to thebuilders through a construction contract. The builder/Developer would be performing his/its role as acontractor and not as a developer although suchcontractor would perform the same functions as thatof a developer.

The agreement would state that the contractor wouldrecover the fee due to him for construction by wayof a right to sell a specified percentage of undividedshare of land and super built area which will bereferred to as “contractor’s share”.

The entire land would continue to be owned by the

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owners and the entire receipts including that of thecontractor’s share would be disclosed as sales revenuein the owner’s hand. From the said revenue the ownerwill reduce the fee paid to the contractor towardsconstruction including the Service tax and VATcharged by him, which will be equal to the saleproceeds derived from transfer of the contactor’sshare. The contractor shall declare the contractreceipts as his income and reduce the actual cost ofconstruction incurred by him to arrive at his profit.

The VAT and Service Tax from the buyers would becollected in the name of the owner and deposited tothe respective authorities accordingly.

A Power of Attorney would be given to the contractorto do all acts, deeds and things as would normallyhave been done by a developer and such Power ofAttorney would confer the status to the contractoras “an agent coupled with interest” as understoodunder Section 202 of the Indian Contract Act, so thatthe owner would not be able to revoke such Powerof Attorney during the period of construction exceptfor specific circumstances mentioned therein.

It is to be noted that as the owner would continue tohold the legal and possessory right on the propertytill it is ultimately transferred to the buyers, therevenue from such sales would be recognized onlyas and when transfer of property takes place.

CHAPTER 6

SALIENT POINTS TO BE INCLUDED IN ADEVELOPMENT AGREEMENT

In this chapter, the general layout of a DevelopmentAgreement (relating to the development of aresidential apartment complex) along with somespecimen clauses are covered together withnecessary precautions to be taken:

1. Heading : -

The agreement is generally titled as a “DevelopmentAgreement”

2. Description of Parties :-

The parties to the agreement are described in detail

starting with the Owner/s of the property concerned.Before describing the owner/s, it should be firstascertained whether the ownership of the propertyconcerned vests with the owner/s as individuals intheir self acquired capacity, or if the ownership vestsin a Hindu Joint family in which case the Kartha, hiswife as a member and his children (both major andminor) should be described as coparceners or if theownership vests in a firm, company, etc. the name ofthe entity along with its address and the personrepresenting the entity should be described in detail.

As far as the Developer is concerned, in case he/ sheis an individual, his/ her age, parentage and addressshould be described in detail and in case the Developeris a firm, company, etc, . the name of the entity alongwith its address and the person representing the entityshould be described in detail.

3. Preamble : -

The description of parties is generally followed by thepreamble which should contain in detail, tracing oftitle in the hands of the present owner/s, the detaileddescription of the property in question and theintention of the owner/s to develop the property byconstructing a residential apartment complex thereon.This should be followed by representations made bythe owner/s relating to their title and other aspectsof the property. The name, experience and expertiseof the developer should then be recited in brieffollowed by a statement stating that the Developerhas approached the owner with an offer to developthe schedule property on certain terms and conditionswhich could be described briefly at this juncture. Theacceptance of the owner/s to these terms andconditions should then be mentioned with aconclusion clearly stating that the terms and conditionsagreed to between the parties will be reduced towriting in the body of the agreement.

4. Body of the Agreement:-

The body of the agreement will be generally precededby a heading “NOW IT IS MUTUALLYAGREED AS UNDER”.

a) The details of the project envisaged on theproperty including the number of blocks of

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apartments, if any, the number of floors on each block,common areas, amenities and facilities, thespecifications relating to construction(generallydescribed in detail in an Annexure),the Floor AreaRatio(F.A.R.) proposed to be utilised, should bedescribed.

b) In case Transferable Development Rights(TDR) accrue and arise to the project on account ofroad widening by the Government for areas comingwithin the jurisdiction of the Bruhat BangaloreMahanagara Palike or in case the Owner and theDeveloper agree to purchase TDR,the same shouldbe mentioned clearly along with the sharing of suchincremental built up area accruing and arising out ofthe TDR.

c) A description of the Owner/s area and theDevelopers area should be mentioned in detail. Aspecimen is mentioned below for your reference

Owners Area

In consideration of the Owner/s having agreed to offerthe Schedule property to the Developer fordevelopment on the terms and conditions containedin this agreement, the Developer hereby agrees athis cost to construct and deliver to the Owner/s, ____% of saleable super built up area in the form ofresidential apartments in the residential apartmentbuilding complex to be constructed by the Developeron the Schedule property along with theproportionate share in car parking, terrace and gardenareas, which together with the right of the owner/sto retain the ownership of __% undivided share, right,title and interest in the Schedule property, shallhereinafter be referred to as the “Owner/s Area”.

Developers Area

In lieu of the Developer agreeing to construct at his/its cost, the Owner/s area for the Owner/s, the Owner/s hereby agree to transfer by way of sale __ %undivided share, right, title and interest in the Scheduleproperty, to and in favor of the Developer and/ or hisnominees, which together with the __ % saleablesuper built up area in the form of residentialapartments in the residential apartment complex tobe constructed by the Developer on the Schedule

property along with the proportionate share in carparking, terrace and garden areas, will hereinafterbe referred to as the “Developers Area”.

d) A clause conferring the right on the Developerto enter into the Schedule property for the purposeof carrying on development will then have to beinserted on the lines indicated earlier in this article toavoid incidence of immediate tax implications.

e) A clause clearly mentioning that it is the dutyand responsibility of the developer to obtain plans,licenses and clearances at his/ its cost for theconstruction on the Schedule property.

f) A clause relating to commencement andcompletion of construction should be recorded in detailclearly specifying the time for commencement andcompletion of the project including the grace periodif any and the compensation payable to the owner/sfor every month of delay or part thereof in completionof the project.

g) A clause shall also be inserted to cover defaulton part of the developer and the options available tothe owner/s in case of such default.

h) A clause mentioning that a GPA is also beinggiven to the Developer in pursuance of this agreementshould be mentioned and a brief description of therights being conferred on the developer under theGPA should form a part of this clause. To protect theinterest of the owner/s it should also be mentionedclearly that the power to execute sale deeds by theDeveloper in favor of prospective buyers and handingover of possession of the Developers area to theprospective buyers shall be acted upon by thedeveloper only after the developer completes theconstruction of the Owner/s area and hands overpossession of the owner/s area to the owner/s.

i) A clause relating to the custody of the originaldocuments of title should be inserted recording theterms of understanding between the parties in thisregard.

j) In case the Owner/s is/are agreeable for thebuilder raising finances for the project on the securityof the Developers area, the developer shouldindemnify the Owner/s from all claims and

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proceedings if and when they arise due to the defaulton the part of the Developer to repay the fundsobtained from the Lender. The Developer should beexpressly made liable to repay the funds borrowedwithout in any way encumbering or creating anycharge on the Owner/s area.

k) The specifications relating to constructionshould be clearly recorded in an annexure to theagreement and the Owner/s and/ or their authorisedpersons should be given the right to carry outinspection during the period of construction.

l) An indemnity should be expressly recorded inwhich the Developer will not only agree to meet allclaims and liabilities arising out of the labour employedon site by the Developer but will also indemnify andrender harmless the Owner/s from any such claims.

m) An indemnity should be expressly recorded inwhich the Developer will not only agree to meet allclaims and liabilities arising out of any defects inconstruction or other issues raised by the purchasersof apartments in the project, any claims and liabilitiesarising out of the contracts entered into by theDeveloper with Architects, contractors, suppliers oflabour, equipment or material related to the project.

n) A clause clearly recording that it is the soleresponsibility of the Developer to obtain occupancy/completion certificate from the concerned statutoryauthority at his/ its cost should be inserted.

o) In case of the Developer paying/ agreeing topay an interest free refundable deposit to the Owner/s, the fact of such payment or agreement to payshould be clearly recorded in a separate clause whichshould also contain the mode and manner ofrepayment of the refundable deposit of the owner/sand the terms and conditions agreed upon in casethe Owner/s defaults in returning the deposit.

5. Other Precautions to be taken: -

a) In case the property is owned by co owner/s,all of them should be made parties to the agreementand in case any co owner is a minor, permission fromthe competent court as required u/s 8 of the Hindu

Minority and Guardianship Act, 1956 should beobtained before the execution of this agreement.

b) In case the property is owned by a Hindu JointFamily, the Kartha, wife of the Kartha as a memberand his children as coparceners (both major and minor)should be made parties to the document with theminor being represented by their father and naturalguardian.

c) In case of the Owner/s and/ or the Developerbeing a company, a copy of the board resolutionconfirming and giving consent to the execution of thedevelopment agreement and the authority to anyperson to represent the company will have to beobtained.

d) In case of the Owner/s and/ or the Developerbeing a firm, all the partners of the firm shouldexecute the documents unless, the power and expressauthority to enter into such agreements or executesuch documents are expressly conferred on onepartner in the deed of partnership.

e) Although the stamp duty and registration feeon the development agreement are generally borneby the Developer, it is advisable to also register aduplicate at a nominal cost which could be retainedby the Owner/s.

CHAPTER 7

CONCLUSION

In this article, an attempt has been made to indicatethe broad guidelines relating to the drafting ofagreements with special emphasis on developmentagreements. The clauses in the developmentagreement indicated are general in nature and wouldvary on a case to case basis. The tax implications havealso been discussed in brief and are to be kept inmind while drafting the agreements with special careto be taken on the choice of words and expressionsused in the document so as to avoid the mischief oftheir being interpreted differently by the taxauthorities.

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4TH TECHNICAL SESSION

Annapurna Kabra is a Fellow member of the Institute of Chartered

Accountants of India. She has contributed the articles on VAT and

is a regular contributor of articles to various professional journals

including the KSCAA Journal. She has co- authored the book on

guide to VAT Audit and Value Added Tax in Karnataka. She has co-

authored the book on VAT Audit for ICAI. She has co authored the

background material of indirect tax of ICAI. She was a committee

member for development of study module for VAT officers and she

is a faculty to Fiscal Policy Institute. She is a committee member of

FKCII Committee. Apart, she has addressed gathering of chartered

accountants, dealers and Departments officers on indirect taxation

matters in various forums. She is working with Dns Consulting

Private Limited in her capacity as a consultant and advisor for

indirect taxes.

CA. Annapurna D. Kabra

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YEAR PRESIDENT SECRETARY

1957-61 Sri S. Kaleeswaran Sri M.R. Rangarathnam1961-62 Sri B.K. Ramadhyani Sri M.R. Rangarathnam1962-68 Sri A. Ramaswamy Iyengar Sri J. Gopalakrishnan1968-69 Sri M.R. Rangarathnam Sri P. Shivaramakrishnan1969-71 Sri J. Gopalakrishnan Sri A.R. Vishwanathan1971-75 Sri K.Y. Shreshti Sri J.J. Madan1975-78 Sri O.R. Pandurang Sri K. Rahman Khan1978-79 Sri Premraj Singhvi Sri D.L. Suresh Babu1979-80 Sri K.V. Shanmukhaiah Sri M.R. Krishnamurthy1980-82 Sri A.R. Vishwanathan Sri A.K. Subramanian1982-84 Sri M.S. Ranganath Sri A.K. Subramanian1984-85 Sri J.G. Ostawal Sri A.K. Subramanian1985-86 Sri K.R. Kumar Sri N.P. Shivashankar1986-87 Sri S. Amarlal Sri N. Nityananda1987-88 Sri N.P. Shivashankar Sri R. Anand1988-89 Sri M.C. Ramakrishna Sri K. Ramanath1989-90 Sri R. Anand Sri S.A. Narayana Shetty1990-91 Sri N.C.S. Raghavan Sri S. Gowthamchand1991-92 Sri S.A. Narayana Setty Sri C. Ganapath Raj1992-93 Sri R. Subramanian Sri Ravindra Raj Bhandari1993-94 Sri A.S. Vishnu Bharath Sri K.Y. Ningoji Rao1994-95 Sri M. Goutam Prakash Khariwal Sri K. Ravi1995-96 Sri K.Y. Ningoji Rao Sri D.C. Chhajer1996-97 Sri C. Ganapathraj Sri D.R. Venkatesh1997-98 Sri S. Prakash Chand Sri I.S. Prasad1998-99 Sri D.R. Venkatesh Sri Lalit M. Sharma1999-00 Sri K. Ravi Sri R. Venkatakrishna2000-01 Sri I.S. Prasad Sri V. Dwarakanath2001-02 Sri Lalit M. Sharma Sri Ravi Prasad2002-03 Sri H.B.M. Murugesh Sri P.R. Suresh2003-04 Sri T.R. Anjanappa Sri H.C. Gulecha2004-05 Sri P.R. Suresh Sri A.B. Shivasubramaniam2005-06 Sri S. Krishnaswamy Sri M.V. Lakshmikantha2006-07 Sri Mallinath S. Nainegli Sri G. Nataraj2007-08 Sri M.V. Lakshmikantha Sri Sreedhara Murthy K.S.2008-09 Sri A.B. Shivasubramaniam Sri Ravindra Beleyur2009-10 Sri M. Marulasiddaiah Sri Manoj Kumar G.2010-11 Sri Allama Prabhu M.S. Sri Maddanaswamy2011-12 Sri Anant Mutalik Sri Basavaraj H.M.2012-13 Sri Maddanaswamy B.V. Sri Raveendra S. Kore2013-14 Sri C.R. Dhavalagi Sri Virupakshappa Tuppad2014-15 Sri Raveendra S. Kore Sri Raghavendra Puranik

ROLL OF HONOUR

11th October2014

One day Seminar onTax implicationson Real Estate Sector

6

Dear Delegates

We would like to take feedback of your experience at the Conference. Thisfeedback would help us enhance our services in future to meet your expectations.

" THANKS FOR YOUR VALUABLE TIME"

Executive Committee 2014-15

Quality & Content of Books / CD Released

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TAX IMPLICATIONS ON REAL ESTATE SECTORHotel Fortune Park JP Celestial, Bangalore

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