Hold the breath: Delhi HC admits plea against section 43CA

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Hold the breath: Delhi HC admits plea against section 43CA

Admits Builder’s challenge on vires of stamp duty value based taxation u/s. 43CA*

Delhi HC admits Ansal Housing & Construction Ltd.’s (‘assessee’) writ challenging vires of Sec. 43CA (which deems stamp duty valuation as sales consideration for land and building held as stock in trade) and amendment to Sec. 56(2)(vii)(b); Assessee argues that these provisions attempt to tax notional income and result in double taxation; HC lists the matter for hearing on January 16, 2018. The appeal was admitted by a division bench comprising of Justice Ravindra Bhat and Justice Sanjeev Sachdeva. Senior Advocate Arvind Datar, assisted by Advocates Kavita Jha and Bhuwan Dhoopar, are representing the taxpayer before the HC. The information contained in the alert is source based. Assessee, Ansal Housing & Construction Ltd., filed a writ petition before Delhi HC challenging the insertion of section 43CA and amendment to Section 56(2)(vii)(b) of the Income Tax Act, 1961 by the Finance Act, 2013 on the following grounds:

i.The effect of application of sections 43CA and 56(2)(vii)(b) is that in cases where the consideration involved in a transaction of purchase or sale of land or building is less than the stamp duty value, then, the excess of such value over the actual consideration would be treated as income both in the hands of the transferor as per section 43CA as well as the transferee as per section 56(2)(vii)(b)(ii). Thus, these provisions result in double taxation and attempt to tax notional income.

ii. There is discrimination in application of sections 43CA and 56(2)(vii)(b)(ii) of the Act as it is a known fact that levy of stamp duty is a state subject. Each state in the Country provides for such a levy where the determination of value on which the levy is imposed is based on different principle methods and basis. There is no uniform method applied on a universal basis in the whole Country. Computation of Income in relation to transfer or receipt of land or building based on the stamp duty value de hors the differences in manner, method and basis of such levy in different States discloses a discriminatory treatment.

iii. Further universal presumption that stamp duty value would be regarded as the full value of consideration without looking into the factual aspects tantamount to discrimination.

iv.Further circle rate is not always the true indicator of the market value of the property as the market value keeps on fluctuating at different times. Further there could be various factors when market value can be less than the stamp duty value like location of the property, decrease in the prices, vastu compliant and auction sale etc. Delhi HC has issued notice in the matter and has listed the case on January 16, 2018. Page 1 of 1


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