Hi,
1. There is a builder partnership firm who has made agreements with customers to sell some flats @ total approx 150L. But the Stamp duty valuation would be 210L. So, will the firm have to show sale of Rs 210L (Section 43CA)
2. What will be the tax for the buyers? They will pay total 150L only when the stamp duty valuation is 210L. Will there be tax for them too on the inadequate consideration (210-150=60L)?
Will it not amount to double taxation?
1. yes, as per FA 2013, the income under the Head PGBP will be calculated taking the sales consideration as rs.210 lakhs.
2. in the hands of buyer (individual or HUF), the difference will be taxed under section 56(2)(viib) as Gift.
YES 210 LAKHS WILL BE THE FULL VALUE OF CONSIDERATION AS PER SECTION 50C. COST IN THE HANDS OF BUYER 150 LAKHS
IN THIS CASE, THE BUYER PAYS TAX ON THE EXCESS OF RS 210-150 I.E. 60 LACS..
NOW THIS BUYER IS ALSO INTO TRADING BUSINESS. WHAT AMOUNT WILL HE ENTER INTO HIS BOOKS AS HIS PURCHASES.... RS 210 LACS OR RS 150 LACS ????
PLEASE REPLY URGENTLY....
THANKS IN ADVANCE
PURCHASE PRICE WILL BE TAKEN AS 150 LAC.
ARE YOU SURE ABOUT THIS??
WE ARE PAYING ONLY 150 LACS NOT 210 LACS.
yes 150 L is correct but when we sell this property than cost of acquisition would be taken as
210 L
Please see interplay of section 43CA vv section 56(2)(vii)(b) in below mentioned table
|
Transaction in Immovable Property, whereby Seller Sell property at 80 lacs and Stamp duty Value is Rs. 100 lacs |
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|
Particulars |
Taxation |
Cost of acquisition in the hands of Buyer |
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Buyers (Individual or HUF) - Treatment of Immovable Property |
Buyers |
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|
Treatment as Stock in Trade |
Treatment as Capital Asset |
Treatment as Stock in Trade |
Treatment as Capital Asset |
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|
Seller- Treatment of Immovable property |
Treatment as Stock in Trade |
Rs. 20 lacs taxable in the hands of Seller u/s 43CA |
Rs. 20 lacs taxable in the hands of Seller u/s 43CA & in the hands of Buyer u/s 56(2)(vii)(b)- DOUBLE TAXATION |
Rs. 80 lacs |
Rs. 100 lacs u/s 49(4) |
|
Treatment as Capital Asset |
Rs. 20 lacs taxable in the hands of Seller u/s 50C |
Rs. 20 lacs taxable in the hands of buyer u/s 56(2)(vii)(b) and in hands of seller u/s 50C |
Rs. 80 lacs |
Rs. 100 lacs u/s 49(4) |
|
FOR EXAMPLE....
SALE CONSIDERATION IS RS 10,00,000..
STAMP DUTY VALUE IS RS 1,16,00,000...
BUYER IS A TRADER... IF HE TAKES RS 10,00,000 AS HIS COST OF AQUISITION, THEN AT THE TIME OF SALE, WON'T IT RESULT INTO EXCESS BUSINESS PROFITS.. IN THIS CASE RS 1,06,00,000...???
I AM INTO REAL ESTATE BUSINESS....
NOW WILL I SHOW PURCHASES IN MY BOOKS AS 116 LACS OR 10 LACS....
IF I SHOW PURCHASES AS 116 LACS... THEN I HAVEN'T PAID SO MUCH OF CASH... I HAVE PAID ONLY 10 LACS.... AND IF I ENTER 10 LACS AS PURCHASES, THEN WHEN I SELL THIS PROPERTY, THERE WILL BE UNNECESSARY INFLATED PROFITS...
CAclubindia
