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Taxation of Builders, Developers, Contractors

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Author(s)

Avadhesh Ojha, Nisha Bhandari, Satyadev Purohit

Publisher

Tax Publisher

ISBN

Edition

2017

Pages | Format

Approx. Product Size

Note : The book "Taxation of Builders, Developers, Contractors" contains 125 chapters

Builders, contractors, real estate developers and construction industry are all important constituents in the fast developing real estate sector which is an emerging sector in our current economic scenario. As vast array of issues revolve around the real estate sector, the present book has been a challenge to us in itself vis-a-vis exploration and presentation of all its related taxation aspects. This compendium of a sort not only comprises income-tax issues but also goes on to incorporate the accounting aspects, service tax issues and VAT related implications and also, an analytical study of the most recent Real Estate (Regulation And Development) Act, 2016, so as to make it a complete source material for a great variety of its users.

The subject matter of this treatise is scientifically arranged in such a manner that one can trace out any of the desired information on any of the aspects he may be looking for in case it is connected with taxation in relation to builders, contractors and construction industry. The entire subject matter is broadly distributed in Books 1 to 7 as under :

Book 1
:
Income Tax Implications in Respect of Builders, Contractors, Construction Industry
Book 2
:
Accounting of Builders and Contractors with ICDS Implications
Book 3
:
Service Tax Implications for Builders, Contractors & Construction Industry
Book 4
:
VAT Implications vis-a-vis Builders, Contractors & Construction Industry
Book 5
:
Central Sales Tax Implications on Builders, Contractors & Construction Industry
Book 6
:
Works Contract and Model GST Act
Book 7
:
Real Estate (Regulation and Development) Act, 2016--Analytical Study
Book 1 dealing with Builders, Contractors, Construction Industry : Income Tax Implications is the most important and detailed book of all, having wide coverage of various income-tax related issues. It is itself divided in Four Parts as under :

Part I : Titled “Construction Activity Specifics”, comprises two introductory chapters.

Part II : Christened as “Builders and Contractors” is divided in Four Sections, namely, A to D as under --

Section A
:
Nature of Income and Tax Implications [15 Chapters]
Section B
:
Issues Arising in Assessment of Builders & Contractors [9 Chapters]
Section C
:
Builders and Contractors to Take Care [3 Chapters]
Section D
:
Income Tax Compliance Specific Obligations [8 Chapters]
Part III : Titled “Construction Industry” is divided in Four Sections namely, A to D as under --

Section A
:
Construction Industry as Business [4 Chapters]
Section B
:
Allowable Deductions Vis-a-Vis Construction Business [11 Chapters]
Section C
:
Disallowance of Certain Payments in Construction Business [4 Chapters]
Section D
:
Incentives Towards Boosting Construction Industry [8 Chapters]
Part IV : Titled “Land Development Agreements and Transferable Development Rights” comprises Seven Chapters dealing with various issues relating to Land Development Agreement.

Accounting in case of builders, contractors and construction industry is quite complex as there are generally more than one accounting periods involved between the initiation of a real estate project and its completion. Hence, it is difficult to assign revenues and costs in the intervening periods and to determine profit or loss of each such period. The ICAI has issued specific Accounting Standards for accounting and revenue recognition by the contractors. As a consequence of the amendment made by the Finance (No. 2) Act, 2014 in section 145(2) “Income Computation and Disclosure Standards (ICDS)” have to be followed for computation of income from A.Y. 2018-19. These are not, however, meant for the maintenance of books of account. Looking at the importance of accounting in case of contractors, builders and construction industry, a separate Book 2 titled “Accounting of Builders and Contractors with ICDS Implications” comprising seven chapters has specifically been provided in this compendium.

Book 3 titled “Service Tax Implications of Builders, Contractors and Construction Industry” aims at discussing the service tax implications on the construction industry as a whole under the currently applicable Negative List regime of taxation of services. The most distinctive aspect of this Book is that the discussion is not based on the type of services covered under the service tax regime as is conventionally done, but the same is made specific to the entities concerned with construction industry, namely, contractors and sub-contractors as well as builders and developers. This Books 3 is divided into six chapters. First and Second chapters provide an overview of the levy of service tax on construction industry in general and principles regarding determination of place of provision of immovable property related services, respectively. Third and Fourth Chapters are devoted to an analytical discussion on ‘Service Tax Implications on Contractors and Sub-Contractors’ and specific exemptions available to works contract service, respectively. The Fifth and Sixth Chapters concentrate on ‘Service Tax Implications on Builders and Developers’ and ‘Exemptions Applicable to Services Provided by Builders and Developers’, respectively.

Book 4 is devoted to the discussion of the Value Added Tax (VAT) implications in the context of the construction industry. The initial two chapters deal with the nature of levy of sales tax/VAT on the works contract transactions with the help of landmark judgments of the High Courts as well as Supreme Court vis-a-vis the nature of the specified activities. The issue of levy of VAT on works contract transactions under as many as 21 States VAT laws is discussed in the other, as many as 21, number of States specific chapters.

Book 5 deals with the Central Sales Tax implications on the inter-State works contract transactions.

Book 6 is devoted to an analytical study of provisions relevant to Works Contract as contained under the Model GST Act.

Book 7 titled “Real Estate (Regulation and Development) Act, 2016--Analytical Study” is self explanatory. The Real Estate (Regulation and Development) Act, 2016, has recently been enacted vide Gazette Notification dt. 26-3-2016, in order to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector. This book comprises 15 chapters dealing with various aspects of this new law, like Registration of Real Estate Project, Regulation and Functions of Real Estate Agents, Promoters, Rights and Duties of Allottees, Constitution, Functions, Powers, etc., of Real Estate Regulatory Authority, Offences and Penalties for contravention of any of the provisions of the Act, etc.

The feature of providing necessary updates pertaining to the subject matter of this treatise, through URL mentioned on page (iii) of the Book, is an icing on the cake. This service is to be provided till December 2017 for the readers of the book and is approachable via a reader specific code provided on page (iii) itself.

The subject matter of this treatise is fully relevant and updated for assessment year 2017-18 and the latest available case law. Discussion of or reference to a significantly large number of Case Law in the text is indicative of the depth of the analytical approach having gone into this work. An assessment year 2018-19 Supplement in the opening pages of the Book is based on 2017 Budget.

We have tried to provide our very best while presenting totality of the subject matter from all possible angles, perspectives and dimensions of the topics concerned. However, we solicit creative feedback from our learned readers so as to be able to improve the forthcoming editions of this book, apart from enhancing our own knowledge

Chapter No	Chapter name
BOOK: 1	INCOME TAX IMPLICATIONS IN RESPECT OF BUILDERS, CONTRACTORS, CONSTRUCTION INDUSTRY
Part: I	Construction Activity Specifics
Chapter: 1	Construction Industry Specifics
Chapter: 2	Entities for Handling Construction Projects
Part: II	Builders and Contractors
Section: A	Nature of Income and Tax Implications
Chapter: 3	Builders and Contractors--Introductory
Chapter: 4	Land Acquisition by Builders
Chapter: 5	Nature of Income from Builder’s Construction Activity
Chapter: 6	Builder’s Income When Treated as Income From House Property
Chapter: 7	Builder’s Income--When Treated as Income From Business
Chapter: 8	Builder’s Income When Treated as Income From Other Sources
Chapter: 9	Income From Construction and Management of Shopping Malls, Business Centres, Departmental Stores, Etc.--Tax Treatment
Chapter: 10	Interest Earned During Construction Period--Tax Treatment
Chapter: 11	Sale of Property by Builders--Tax Treatment
Chapter: 12	Deeming of Stamp Duty Value as Consideration for Transfer of Immovable Property
Chapter: 13	Tax Implications of Conversion of Capital Asset into Stock-in-Trade
Chapter: 14	Transfer of Land as Capital Contribution in Firm/AOP/BOI
Chapter: 15	Transfer of Capital Asset on Dissolution of Firm/AOP/BOI
Chapter: 16	Income of Builders/Contractors on Presumptive Basis
Chapter: 17	Profits and Gains of Foreign Companies Engaged in the Business of Civil Construction, Etc., in Certain Turnkey Power Projects
Section: B	Issues Arising in Assessment of Builders and Contractors
Chapter: 18	Tax Treatment of Alleged Unexplained Investment in Construction by Builders, Contractors, Etc. [Section 69]
Chapter: 19	Justification of Addition Under Section 69B
Chapter: 20	Dealing with Addition for Unexplained Expenditure Under Section 69C
Chapter: 21	Reference to Valuation Officer for Estimating Cost of Construction --Circumstances and Justification
Chapter: 22	Reference to Valuation Officer for Estimating Cost of Construction --Circumstances and Justification
Chapter: 23	Estimation of Income of Builders, Contractors, Etc., and Justification Thereof
Chapter: 24	Rejection of Accounts of Builders, Contractors--Circumstances, Consequences and Justification Thereof
Chapter: 25	Addition on Account of Cash Credit
Chapter: 26	Possibilities of Invoking Penalty Provisions
Section: C	Builders and Contractors to Take Care
Chapter: 27	Possibility of Survey Proceedings by Assessing Officer
Chapter: 28	Handling Certain Issues During Survey Proceedings
Chapter: 29	Precautions Vis-a-Vis Various Expenditures and Transactions
Section: D	Income Tax Compliance Specific Obligations of Builders and Contractors
Chapter: 30	Requirement As to Maintenance of Books of Accounts
Chapter: 31	Requirement As to Tax Audit of Accounts
Chapter: 32	Filing of Return of Income
Chapter: 33	Payment of Advance Tax
Chapter: 34	TDS Related Obligations Vis-a-Vis Construction Industry
Chapter: 35	TDS Under Section 194C from Payment to Contractors
Chapter: 36	TDS Under Section 194-IA on Transfer of Immovable Property
Chapter: 37	TDS While Making Other Payments
Part: III	Construction Industry
Chapter: 38	Scope of Construction Industry Business
Chapter: 39	Construction as Adventure in the Nature of Trade
Chapter: 40	Business Income of Construction Industry
Chapter: 41	Treatment of Losses in the Course of Construction Business
Chapter: 42	Capital Vis-a-Vis Revenue Expenditure in the Context of Construction Industry
Chapter: 43	Repairs, Renovation and Replacement Expenditure
Chapter: 44	Depreciation Allowance Vis-a-Vis Construction Industry
Chapter: 45	Investment Allowance for Acquisition and Installation of New Plant or Machinery in Certain Cases
Chapter: 46	Deduction Under Section 35AD for Capital Expenditure in Respect of Specific Construction Activities
Chapter: 47	Payments to Employees
Chapter: 48	Deduction in Respect of Interest on Capital Borrowed for Construction Purpose
Chapter: 49	Deduction for Bad Debts During Construction Business
Chapter: 50	Other Business Deductions and Construction Industry
Chapter: 51	Residuary Business Expenditure--Allowability Perspective
Chapter: 52	Particular Expenses Incurred in Construction Business
Chapter: 53	Payment Disallowable for Non Deduction of Tax at Source
Chapter: 54	Excessive Payment to Relatives--Disallowance Under Section 40A(2)
Chapter: 55	Disallowance of Cash Payments Exceeding Rs. 20,000 [Section 40A(3)]
Chapter: 56	Payments Allowable Only on Actual Payment [Section 43B]
Chapter: 57	Incentive to Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts [INVIT]
Chapter: 58	Infrastructure Development Eligible for Deduction Under Section 80-IA
Chapter: 59	Deduction in Respect of Housing Projects [Section 80-IBA Effective From Assessment Year 2017-18]
Chapter: 60	Deduction Under Section 80-IB (10), as then Relevant in Respect of Profits from Development of Housing Projects
Chapter: 61	Investment in Hospitals in Non Metro Cities [Deduction Under Section 80-IB(11C)]
Chapter: 62	Investment in Business of Hotels and Convention Centres in Specified Areas [Deduction Under Section 80-ID]
Chapter: 63	Investment in Business in North-Eastern States [Deduction Under Section 80-IE]
Chapter: 64	Deduction or Exemption Vis-a-Vis Co-operative Housing Society
Part: IV	Land Development Agreements and Transferable Development Rights
Chapter: 65	Introducing Land Development Agreements
Chapter: 66	Point of Time of Taxation of Gain Arising Due to Land Development Agreement
Chapter: 67	Accrual and Nature of Capital Gain
Chapter: 68	Important Judgments Relating to Taxation Issues Regarding Land Development Agreement
Chapter: 69	Issues Allied to Land Development Agreements
Chapter: 70	Sale of Transferable Development Rights (TDR)
Chapter: 71	Sample Land Development Agreements
BOOK: 2	ACCOUNTING OF BUILDERS AND CONTRACTORS WITH ICDS IMPLICATIONS
Chapter: 72	Method of Accounting
Chapter: 73	ICDS Relating to Construction Contract
Chapter: 74	Guidance Note on Accounting of Real Estate Developers
Chapter: 75	Accounting of Construction Contracts [AS-7]
Chapter: 76	Revenue Recognition [AS-9]
Chapter: 77	Accounting Treatment of Borrowing Costs [AS-16]
Chapter: 78	Requirements as per Other Important Accounting Standards
BOOK: 3	SERVICE TAX IMPLICATIONS FOR BUILDERS, CONTRACTORS & CONSTRUCTION INDUSTRY
Chapter: 79	An Overview of Levy of Service Tax in India
Chapter: 80	Place of Provision of Immovable Property Related Services
Chapter: 81	Service Tax Implications on Contractors and Sub-Contractors
Chapter: 82	Exemptions Applicable to Works Contract Service
Chapter: 83	Service Tax Implications on Builders and Developers
Chapter: 84	Exemptions Applicable to Services Provided by Builders and Developers
BOOK: 4	VAT IMPLICATIONS VIS-A-VIS BUILDERS, CONTRACTORS & CONSTRUCTION INDUSTRY
Chapter: 85	Levy of Sales Tax/CST on Works Contract--An Overview
Chapter: 86	Works Contract Vis-a-Vis Specific Activities
Chapter: 87	Works Contract Under Andhra Pradesh Value Added Tax Act, 2005
Chapter: 88	Works Contract Under Assam Value Added Tax Act, 2003
Chapter: 89	Works Contract Under Bihar Value Added Tax Act, 2005
Chapter: 90	Works Contract Under Chhattisgarh Work Contract
Chapter: 91	Works Contract under Delhi Value Added Tax Act, 2004
Chapter: 92	Works Contract Under Goa Value Added Tax Act, 2005
Chapter: 93	Works Contract under Gujarat Value Added Tax Act, 2003
Chapter: 94	Works Contract under Haryana Value Added Tax Act, 2003
Chapter: 95	Works Contract under Himachal Pradesh Value Added Tax Act, 2005
Chapter: 96	Works Contract Under Jharkhand Value Added Tax Act, 2006
Chapter: 97	Works Contract Under Karnataka Value Added Tax Act
Chapter: 98	Works Contract under Kerala Value Added Tax
Chapter: 99	Works Contract Under Madhya Pradesh Value Added Tax Act, 2002
Chapter: 100	Works Contract Under Maharashtra Value Added Tax
Chapter: 101	Works Contract Under Odisha Value Added Tax Act, 2004
Chapter: 102	Works Contract under Punjab Value Added Tax Act, 2005
Chapter: 103	Works Contract under Rajasthan Value Added Tax Act, 2003
Chapter: 104	Works Contract under Tamil Nadu Value Added Tax Act, 2006
Chapter: 105	Works Contract Under Uttar Pradesh Value Added Tax Act
Chapter: 106	Works Contract Under Uttarakhand Value Added Tax Act, 2005
Chapter: 107	Works Contract Under West Bengal Value Added Tax Act, 2003
BOOK: 5	CENTRAL SALES TAX IMPLICATIONS ON BUILDERS, CONTRACTORS & CONSTRUCTION INDUSTRY
Chapter: 108	Central Sales Tax--An Overview
Chapter: 109	Central Sales Tax on Works Contract
BOOK: 6	WORKS CONTRACT AND MODEL GST ACT
Chapter: 110	Provisions of Model GST Act Relevant to Taxation of Works Contract
BOOK: 7	REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016--ANALYTICAL STUDY
Chapter: 111	Introductory
Chapter: 112	Registration of Real Estate Project
Chapter: 113	Registration and Functions of Real Estate Agents
Chapter: 114	Promotors and Their Functions and Duties
Chapter: 115	Rights and Duties of Allottees
Chapter: 116	Offences and Penalties for Contravention of the Real Estate (Regulation and Development) Act, 2016
Chapter: 117	Constitution of the Real Estate Regulatory Authority
Chapter: 118	Functions of the Real Estate Regulatory Authority
Chapter: 119	Powers of the Real Estate Regulatory Authority
Chapter: 120	Central Advisory Council--Its Constitution and Functions
Chapter: 121	The Real Estate Appellate Tribunal
Chapter: 122	Real Estate Regulatory Authority Vis-a-Vis Finance, Accounts, Audits and Reports
Chapter: 123	Power to Make Rules and Regulations
Chapter: 124	Power of Appropriate Government to Issue Directions or to Supersede Authority
Chapter: 125	Miscellaneous Issues Relevant to Real Estate (Regulation And Development) Act, 2016

Chapter: 9 - Income From Construction and Management of Shopping Malls, Business Centres, Departmental Stores, Etc.--Tax Treatment

Will update soon

Chapter: 17 - Profits and Gains of Foreign Companies Engaged in the Business of Civil Construction, Etc., in Certain Turnkey Power Projects

Will update soon

Section: B - Issues Arising in Assessment of Builders and Contractors

Will update soon

Chapter: 18 - Tax Treatment of Alleged Unexplained Investment in Construction by Builders, Contractors, Etc. [Section 69]

Will update soon

Chapter: 60 - Deduction Under Section 80-IB (10), as then Relevant in Respect of Profits from Development of Housing Projects

Will update soon

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