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Brief analysis:

  1. Any transaction of the property whether it is held as a capital asset or stock in trade should not be traded below the stamp duty value otherwise it will attract the double taxation.
  2. In genuine cases the section 50C may be useful and valuation of the property may be done from valuation officer to prove the actual consideration may be lesser than the stamp duty value of the property.
  3. 5% difference in the stamp duty value and actual consideration is allowable as per the budgetary provisions 2018 of the Income tax act, 1961

To be discussed next:

We shall discuss soon, the TDS & Capital gain related issues as per the latest amendments w. r. t. Joint development agreements, development agreements with area sharing / revenue sharing/ flats allotments models  

In depth summary: Section 43CA effect from 1st April, 2014:

Before 1st April, 2014, as per section 50C under Income tax Act, 1961 "Where the consideration received or accruing as a result of the transfer by an assesses of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer,  the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer."

This section is applicable to capital assets only but in the budget 2014 government introduced section 43CA and as per this section the provisions of the section 50C extended to stock in trade also which has huge impact of the real estate transactions. Plots, Lands, Flats, Offices, shops are buying and selling in the real estate company is stock in trade and not a capital assets. So earlier section 50C doesn’t cover it but section 43CA is applicable to all those assets. Now as per this section, if Real Estate Company has sold any Plots, Lands, Flats, Offices, shops etc below stamp duty value then revenue should be booked at stamp duty value of the property transferred so notional gain is taxable in the hands of seller.

Finance Act, 2013 has substituted clause (b) of section 56(2)(vii) w.e.f. 1.4.2014 providing, inter alia, that where an individual or Hindu Undivided Family receives, in any previous year, from any person or persons any immovable property-

(i) Without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(ii) For a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration shall be chargeable to income tax under the head Income from Other Sources.

Now to reduce the black money transactions, government has invoke more stringent provisions in the budget 2017 and introduced section 56(2)(x) (b)

Any immovable property -

(A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(B) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub-clause:

Provided further that the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of agreement for transfer of such immovable property:

Provided also that where the stamp duty value of immovable property is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of this sub-clause as they apply for valuation of capital asset under those sections;

As per the above provisions, the difference between stamp duty value of the property and actual consideration is taxable as per section 43CA in the hands of seller and as per section 56(2)(x) in hands of purchaser under head income from other source. This impacted in the double taxation of the amount of stamp duty value over actual consideration. 5% difference is allowable as per the budgetary provisions of the 2018.

The author can also be reached at canitesh.mukadam@gmail.com

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Category Income Tax, Other Articles by - CA Nitesh Mukadam 



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