Section 43CA income tax act

– Provision of Section 43CA is applicable to all categories of assessees who deal in immovable property being land or building or both. Thus, the provision of this section is applicable to Individual, Firm, HUF, Company or any other category of assessees.

– Provision of this section is applicable to all kind of immovable properties being Land or Building or both, held as stock in trade. It may be a residential flat, commercial flat, industrial building or plot, residential plot in a township, agricultural land whether in rural or urban area etc.

-Provision of Section 43CA shall be applicable in case of transfer of ownership of property by any mode. In case, transfer of immovable property takes place without registration of sale deed but by way of execution of sale agreement / Power of Attorney or by way of transfer with the regulatory authority or in any other manner, provision of Section 43CA shall be applicable.

In case market price of the property is less than stamp duty value-sub section (2) of section 43CA

The sale consideration agreed between the parties at the time of entering into sale agreement is generally higher than the prevailing stamp duty value of the property applicable as on the date of sale agreement but in case of certain genuine cases, where market price is less than the stamp duty value of the property, sub section (2) of Sec 43CA takes care of the situation wherein provision has been made to make representation to the Assessing Officer for referring the matter to the valuation officer to determine the fair market value of the property. Sub section (2) of section 43CA states as under:-

(2) The provisions of sub section (2) and sub section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub section (1)

Since sub section (2) & (3) of section 50C have been incorporated in section 43CA, it would have the effect  that in case fair market value of the property determined by the valuation officer is less than stamp duty value of the property, such fair market value shall be considered for the purpose of applicability of the provision of section 43CA.

Stamp duty valuation on the date of sale agreement- sub section (3) & (4) of section 43CA

Sub section (3) and sub section (4) of Section 43CA have further provided to adopt stamp duty value of the property assessable as on the date of entering into sale agreement instead of the value assessed as on the date of transfer of the property. Sub section (3) and sub section (4) of section 43CA read as under:

(3)Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub section (1) may be taken as the value assessable by any authority of a state government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.

(4)The provisions of sub section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the asset.

Sale consideration between the seller and the buyer is negotiated at the time of entering into sale agreement and not at the time of transfer of the property. Therefore, sub section (3) has provided that stamp duty valuation of the property applicable as on the date when sale consideration is fixed between the parties by entering into the agreement is to be considered for comparing with the actual sale consideration agreed. Thus, any agreement which is legally enforceable entered between the parties fixing the value of consideration for transfer of the property will be relevant for the purpose of applicability of the provision of Section 43CA. It may be an allotment letter issued by the developer or a buyer’s agreement executed, fixing the value of the consideration and agreed to by both the parties.  Further, sub section (4) takes care of the situation so as to put check on in-genuine anti-dated agreements.

Courtesy: ITATONLINE.ORG....