Section 43ca

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RAVI SONI (Querist)

30 November 2013 "A" (an Individual as Seller) wants to sell his old ancestral Residential Housing Property, which is more than 100 yrs old, to "B" (a Private Limited Company as Purchaser) for a consideration of "X" amount. The rate assessed by the Registrar for Stamp Duty is triple times "X".

Now, the query is regarding the liability of "B" (The Purchaser) under the Income Tax Act. The following are my queries:-

1. Will the property be treated as a "Capital Asset"?
2. Whether "Section 43 CA" is applicable in the aforementioned case because it excludes Capital Assets?
3. Whether "Section 43 CA" is applicable upon the Purchaser ("B") in the aforementioned case?
4. If "Section 56" is applicable whether a "Pvt. Ltd. Company" is included therein or is it for "Individuals" and "H.U.F." only?

I request you to please provide me the solution.

Hitendra Jain

Hitendra Jain (Expert)

30 November 2013 1) As mentioned in the question "sell his old ancestral" ; it falls within the criteria in 2(14) being
- Property of Any kind held by an assesse.

2)There are 2 Sections one is 43CA and another is 50C. Because it is a capital assets sec. 50C would applicable but if it would held by assesse as stock in trade then Sec 43CA would govern the situation.

3) in your query B Being a private limited company is buyer. It is paying money to purchase a property and hence not falling in the criteria of Assessee. It were A if satisfying other conditions.

Sec. 43CA Starts with "Where the consideration received or accruing as a result of the transfer by an assesse.."

consideration is received by / accruing to the owner of the property which is "A"

4) Sec. 56(vii) would also not applicable in case of B because as per the section Receiver of Immovable property is neither Individual nor HUF.

Implications under Income Tax Act:

To A

Sale Consideration 3x
less Indexed Cost of Acquisition
Less Indexed Cost of construction
Less Expenses Related with Transfer
Long Term Capital Gain = Balance

To B
Property would either form part of Stock in trade or Fixed Assets as the case may be.

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