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June 29 To July 5, 2019 u Taxmann’s Corporate Professionals Today u Vol. 45 u 37Capital gains on JDAs in
case of assessees other than
Individuals & HUFs
S.KRISHNAN
CAIntroduction
- Taxability of capital gains under Joint Development
Agreement (JDA) has always remained a contentious issue.
This results in wastage of time and money. Sometimes if the
transaction of JDA does not go through what would happen?
In order to overcome this anomalous situation sub-section
(5A) was inserted in section 45 of the Income-tax Act (the
Act) with effect from 1-4-2018, i.e., from the assessment year
2018-19 by the Finance Act, 2017. Section 45(1) of the Act
starts with “Any profits or gains arising from the transfer
of a capital asset effected in the previous year” clearly
establishing that the provisions of the this section are not
confined to individuals or HUFs but to all other assessees.
However, the provisions of section 45(5A) of the Act are
confined only to individuals or HUFs. The question arises
whether other kinds of assessees are intentionally left out or
was the decision to confine the benefit only to individuals
and HUFs taken consciously?
Memorandum Explaining the provisions of the Finance
Bill, 2017
2. The purpose for which this amendment was made was
explained in clause 22 thus-
“Under the existing provisions of section 45, capital gain is
chargeable to tax in the year in which transfer takes place
except in certain cases. The definition of “transfer”, inter alia,
includes any arrangement or transaction where any rights are
handed over in execution of part performance of contract,
even though the legal title has not been transferred. In
such a scenario, execution of Joint Development Agreement