RERA - Promoter's spl. bank a/c - AUDIT nd CERTIFICATION by...!

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Provisions Of IT Act (Of contextual relevance)

45. Capital gains 1

(1) ² ] Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections ^3 4 ] 54, 54B, ⁵ ] ^6 7 54D, ⁸ 54E, 54F ⁹ , 54G and 54H]]]]], be chargeable to income- tax under the head" Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place.

2. Section 45(5A)

2.1 Section 45 (5A)- Notwithstanding anything contained in sub-section (1), where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. For the purposes of section 48, the stamp duty value on the date of issue of the said certificate, of his share, being land or building or both in the project, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset:

Provided that the provisions of this sub-section shall not apply where the assessee transfers his share in the project on or before the date of issue of said certificate of completion. The capital gains shall be deemed to be the income of the previous year in which such transfer takes place and the provisions of this Act, other than the provisions of this sub-section, shall apply for the purpose of determination of full value of consideration received or accruing as a result of such transfer.

2.2 Explanation :- For the purposes of this sub-section the expression—

  (i) "competent authority" means the authority empowered to approve the building plan by or under any law for the time being in force ;

 (ii) "specified agreement" means a registered agreement in which a person owning land or building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash ;

(iii) "stamp duty value" means the value adopted or assessed or assessable by any authority of Government for the purpose of payment of stamp duty in respect of an immovable property, being land or building or both.'.

Section 50C uses value adopted by the Stamp Valuation Authority (SVA) for the purpose of levying stamp duty on registration of properties, as guidance value to determine undervaluation of land or building if any in the sale agreement. In case sale consideration received or claimed to be received by seller on sale of land or building or both is less than value adopted by stamp valuation authority, such value adopted by SVA would become actual sale consideration received or accruing to the seller. Therefore, capital gain would be Valuation as per stamp valuation authority reduced by cost/indexed cost of acquisition.

However, budget 2018 has brought about an amendment in section 50C whereby no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration. This has been introduced in order to minimize hardship in case of genuine transactions in the real estate sector.


As per the RERA Act, the promoter has to maintain a 'separate account' for every project undertaken wherein 70 percent of the money received from the buyers shall be deposited. Such funds can only be used for the purposes of construction and land cost. Such a fund can be maintained with any scheduled bank. "In RERA, escrow and separate accounts mean one and the same thing", says Nair.

Withdrawals from the separate account
The withdrawal from the separate account wil .. 

Read more at:
//economictimes.indiatimes.com/articleshow/58242934.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Not an escrow but a separate account
Contrary to what is commonly known and what the initial real estate bill talked about the 'escrow account', the RERA Act as it stands today, says, "The account has to be self-maintained and is not an escrow account requiring the approval of the Authority for withdrawal."

As per the RERA Act, the promoter has to maintain a 'separate account' for every project undertaken wherein 70 percent of the money received from the buyers .. 

Read more at:
//economictimes.indiatimes.com/articleshow/58242934.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Sanction limits and audit
To avoid any misuse of the funds, the promoter is required to get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered accountant and it shall be verified during the audit that the amounts collected for a particular project have been utilize .. 

Read more at:
//economictimes.indiatimes.com/articleshow/58242934.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

The concepts (terms/ phrases), with mutually distinct connotation, fitting /be appropriate depending on the given context,  calling for a sharp FOcUS>

>accruing 
>arising 
>received

> receivable /deemed to be received

> transfer (-effected)

As per section 4(2)(l)(D) of RERA Act;

 ‘seventy per cent. of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose:

Provided further that the amounts from the separate account shall be withdrawn by the promoter after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project’ 

Portion highlighted - TO FOCUS ON THE AREAS  FRAUGHT WITH  PROBLEMS IN IDENTIFYING AND DETERMINING THE EXACT ...; ESPECIALLY, IF PROMOTER IS ALLOWED TO DEVELOP AND CONSTRUCT UNDER A jda WITH LANDOWNER - SEE BELOW >   


Palkhivala's TEXT Book (EXpert commentary nd CAse LAw) -

Pgs.

RERA - 'Cost of   ', 'realised', 

Project , if under a JDA 

Landowner, by and large,  'allows' promoter to develop on the land owned , for construction and sale of  UNITS in a housing  complex BY PROMOTER ; 

By whatever name called,- licence, lease (short term or long term) or whatever- consideration  in kind- in the form of one or more constructed units, plus cash (Cheque) 

landowner - taxed (CGT) on FMV of the UNIT(s) on the date of transfer +Cash- say X

As a corollary, cost to promoter of the land must be taken as the same i.e. X 

Premised so, also for deposit in the spl. bank account, it is the same value - X, to be considered 

And, for obvious reasons, such a value , it is inconceivable, could be ascertained /determined at any point of time earlier than the final completion of the project, and the units are ready for 'possession' and 'final conveyance' to purchasers , so also the landowner .  

See posted comments @https://taxguru.in/corporate-law/difficulty-issue-ca-certificate-rera.html

ALSO Cross Refer (of EQual RElevance) Posts on,- GST On Realty 'under constrution housing complex' ("Deemed Construction Contract")- Why the Machinery for Levy  is absent (or malignant)- 
Say (Gist) -  https://vswaminathan-swamilook.blogspot.com/2018/01/swamilook-blogs-on-gst-et-al.html