MALAD GOREGAON CPE STUDY CIRCLE OF WIRC OF ICAI ON Speaker : CA. TARUN GHIA For Direct Taxes Updates to : For Property updates to :

I. LEGAL AND PRACTICAL ASPECTS IN DEVELOPMENT AGREEMENTS : 1. Relevant laws : 2. Role of CAs in drafting documents 3. Implications in sale vis a vis development agreement 4. Society Redevelopments having freehold or leasehold titles 5. Societies without conveyance deed 6. Redevelopments of tenanted premises

7. Redevelopment of MHADA properties 8. Redevelopment of MCGM properties 9. Redevelopment of properties in Greater Mumbai 10. Redevelopment of CRZ properties 11. Slum Redevelopments 12. Assignment of development rights

13. Dissents/Litigations in redevelopments of society/ tenanted properties 14. Drafting of development agreement a crucial aspect 15. Drafting will never be complete in one stroke 16. Laws vis a vis Procedural aspects 17. MOFA, Possession vs. license to enter upon

19. Verification of title of property, measurements, FSI consumed, surplus FSI, additional FSI, TDR FSI, Premium FSI 20. Ensuring Corpus Fund, hardship compensation 21. Ensuring reconstruction of flats free of charge with enhanced areas 22. Ensuring better amenities to be provided by the developer 23. Ensuring rental allowance for temporary alternate accommodation for agreed period as well for the grace and force majeure events

24. Permanent Alternate Accommodation 25. Exit Route 26. Issues about Premium FSI and FSI above “2” 27. Violation of TDR norms and regularization thereafter 28. Issues connected with Demolition of the existing building(s) 29. Existing building(s) may be demolished afterwards- FSI imbalance

30. No possession without OC ! Law vis a vis practices 31. Force Majeure events 32. Issues in drafting and invocation of bank guarantee 33. Importance of Individual Agreements 34. Stamp duty and registration aspects in individual agreements 35. Benefit of FSI beyond a point to Society : implications

36. Constructions without consumption of FSI 37. Documentary evidences to be obtained from members before vacating premises 38. Issues w.r.t. mortgaged flats 39. Purchase of TDR in the name of Society by the Developer and implications 40. Issues in Collection of proportionate contributions from the incoming members 41. Drafting Power of Attorney

42. Financials of Developer 43. Construction documents in Original by Developer to Society 44. Avoid irregularities like M-20, AGM, etc. 45. Role of Architect of Society 46. Liability of Developer for Defects in Construction for Reasonable Period 47. Termination of Development Agreement & Consequences

II. TAX ISSUES IN REDEVELOPMENTS 1. For the Developers: Providing free of charge construction to existing members and accounting and tax issues for the developer Redevelopments and benefits u/s. 80IB(10) 2. For the Owner(s) : Point of time when income may become taxable in respect of a development agreement

3. Section 53A of TP Act : 4.Section 2(47)(v) of I. Tax Act 5. Taxability : i. Adventure in the nature of trade ii. Short term capital gains iii. No cost theory iv. Long term capital gains

6. Applicability of section 50C to development agreements 7. Taxable Entity : a. Flat Owners/ Members b. Condominium of Apartment Owners c. Company d. Co-operative Society 8. Society as taxable entity vs. Members as a taxable entity 9. Receipt in the hands of members from society or from developer

10. Application of income vs. diversion of income by overriding title 11. Status of a flat owner/member of a society A flat in a CHS – occupancy right due to membership ! 13. MCS Act: Society is body corporate: Can acquire, hold and dispose off property

14. Termination of a Development Agreement : 15. Legal and tax consequences 16. MOU then DA : Legal & Tax consequences 17. Subsequent events : Revision in terms

III. JOINT DEVELOPMENTS – JOINT VENTURES 1. Need for Joint developments 2. Partnership vs. Joint Venture 3. Governing Laws, legal and tax implications 4. Stamp duty & Registration 5. Computation of Income of Joint Venture

6. If taxed as AOP i. Charge of tax ii. When shares of members are indeterminate or unknown iii. When shares of members are determinate and known iv. Computation of Members’ Shares v. Income forming part of total income on which no tax payable vi. Income for rate purposes vii. Interest, Salary, bonus, commission, remuneration to members viii. Interest to member

ix. Interest paid to member in a representative capacity x. Interest paid to a member on behalf of another person xi. Interest etc. paid may include payable xii. Transactions between with members xiii. Taxation under the head Capital Gains xiv. Deductions under Chapter VI-A xv. Set off of losses xvi. Filing of Return of Income

IV. ISSUES IN JOINT DEVELOPMENTS IN PARTNERSHIP 1. Joint developments 2. Distribution of assets on dissolution or otherwise : a. Dissolution b. Reconstitution c. Retirement 3. Revaluation of assets & Credit to Partners 4. Sale of units by firm to a partner 5. Dissolution and discontinuation of business Thank You