Section 43CA of the Income Tax Act, be applied retrospectively giving benefit to Property buyers
In order to understand whether the Proviso to Section 43CA can be applied retrospectively or not, let us first take on board what the actual provisions of the law are. We will also analyse the same with the help of a case – M/S. Feber Construction,, Mumbai vs Acit-21(1), Mumbai on 12 March, 2020.
Provision of the Law
Section 43CA provides that in case of transfer of land or building (other than a capital asset), stamp duty value shall be taken as the full value of consideration for the purposes of computing business profits, if stamp duty value is more than actual consideration.
A proviso had been inserted to Section 43CA (with effect from AY 2019-20) to provide that where the stamp duty value does not exceed 105% of the consideration received (or accruing as a result of the transfer), the consideration so received (or accruing as a result of the transfer) shall be deemed to be the full value of the consideration.
In simple words, the full value of consideration will be higher of:-
actual consideration received
stamp duty value
Provided, Stamp Duty Value does not Exceed 105% of Actual Consideration
Illustration to Understand Section 43CA
|Property||Actual Consideration||Stamp Duty Value||105% of Actual Consideration||Value to be considered|
For Instance, A agreed to sell his house to B in 2014. The sale value of the house was Rs 100 whereas the SDV (Stamp Duty Vale) was Rs 103. Prior to the Proviso to Section 43CA, the value of the house would be considered as Rs 103.
After the proviso to Section 43CA was inserted, in the same situation, the value of the house will be considered as Rs 100 as the difference between the actual sale value and the SDV is less than 5%.
Thus this proviso provides a relief to the assesse for marginal differences.
Let us refer a case law to understand whether such benefit will be available on retrospective basis.
Facts of the Case:-
Assessee is a builder and developer. During the assessment, the Assessing Officer invoked the provisions of Section 43CA and disallowed the differences between agreement value for sales and the stamp value for the registration.
In this case the Flat 1902 of the assessee was agreed to be sold on 06.11.2012, which was prior to introduction of the provisions of section 43CA of the Act. The total amount received on booking was Rs 30,00,000 whereas the SDV was 31,00,000. The AO contended that the SDV is to be considered as the agreement was entered before the proviso to Section 43CA was implemented.
The assessee dissatisfied with the treatment of the AO, being of the opinion that only Rs 30,00,000 is to be considered as the sale value as per the Proviso to Section 43CA, appealed before the CIT(A) against the decision.
Contention of CIT(Appeals):-
CIT(appeals) upheld the action of the AO. As regards the claim of sale of the said flat, CIT(A) held that assessee cannot claim credit that the agreement for the same took place in 2012 as the assessee has declared the sale in the present assessment year.
The assessee appealed against the order to the Income Tax Appelate Tribunal (ITAT)
Contention of ITAT:-
- ITAT held that there is only marginal difference between the stamp value and the agreement value and hence the difference should not be added.
- Proviso was inserted to grant relief where there is only a 5% variation in the agreement value and stamp value.
- It was aimed at mitigating the distress or hardship which was caused to the taxpayer on the invocation of deeming provisions of section 43- CA where there is marginal variation upto 5%.
Hence, the ITAT ruled that no addition shall be made by the assessing officer by invoking the provisions of Section 43CA.
The Provisions of Section 43CA are inserted to provide relief to the assessee where there are marginal differences and therefore the proviso took retrospective effect.
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