INCOME TAX ACT theTAXtalk STAMP DUTY VALUATION IS IMPORTANT

STAMP DUTY VALUATION IS IMPORTANT IN INCOME TAX ACT

13th March 2018

INCOME TAX ACT

Income tax is not always on actual income. There are the instances where tax is leviable without actual income.

Section 50C & 43CA are two such provisions in the Income Tax Act which levies income tax on amount of notional income.

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Sec 50C is applicant if the capital asset is transfer for a consider less than the Stamp duty value. In such case, value assess by Stamp duty author shall be take as consider (full value of consideration) for compute of capital gain. Section 50C will not be applicant if the land or building is transfer as stock in trade.

Thus, Section 43CA has been inserte by the Finance Act 2013, where the consideration for the transfer of asset (other than capital assets) being land or building or both, is less than Stamp duty value, then the value so adopte or assesse shall be deem to be the full value of consideration for compute income under the head Profits and gains of business and profession.

When the date of agree and the date of register is not same, then the stamp duty value of the date of agree shall be taken and not the date of register only if the amount of consideration is received by any mode (other than cash) on or before the date of Agreement.

Taxpayer can challenge the stamp duty valuation authority if the value adopted for stamp duty purpose is more than the Fair Market Value (FMV) on the date of transfer. If the FMV is less than the value adopted for stamp duty purpose, than Assessing officer may take FMV as full value of consideration. However, if the FMV is more than the value adopted for stamp duty purpose, than the assessing officer will take the amount which is for stamp duty purpose as full amount of consideration.

More specifically, Section 43CA will be applicable to the developers and builders who hold land and building as stock in trade.

Section 50C of the Income Tax Act reads as under:

Special provision for full value of consideration in certain cases.

50C. (1) Where the consider receive or accrue as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopt or assesse or assesse by any author of a State Government (here after in this section referee to as the “stamp valuation author”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopt or assesse or assesse shall, for the purposes of section 48, be deem to be the full value of the consider receive or accruing as a result of such transfer :

[Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:

Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer.]

(2) Without prejudice to the provisions of sub-section (1), where—

(a) The assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;

(b) the value so adopt or assesse or assesse by the stamp valuation authority under sub-section (1) has not dispute in any appeal or revision or no reference has made before any other author, court or the High Court,

The Assesse Office is refer the value of the capital asset to a Value Office and where any such refer is made.

The provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

Explanation 1.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

Explanation 2.—For the purpose of this section, the expression “assesse” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contain in any other law for the time being in force, adopt or assesse, if it were referee to such authority for the purpose of the payment of stamp duty.

(3) Subject to the provisions contain in sub-section (2), where the value ascertain under sub-section (2) exceeds the value adopted or assessed or assesse by the stamp valuation authority referred to in sub-section (1), the value so adopted or assesse or assesse by such authority shall be take as the full value of the consideration receive or accruing as a result of the transfer.

Section 43CA of the Income Tax Act is reproduce as under:

Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.

43CA. (1) Where the consideration receive or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopte or assesse or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer.

The value so adopt or assesse or assesse shall, for the purposes of computing profits and gains from transfer of such asset, be deem to be the full value of the consideration receive or accruing as a result of such transfer.

(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 adopte or assesse or assessable under sub-section (1).

(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 referre to in sub-section.

(1) May be take as the value assesse 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 receive by any mode.

Other than cash on or before the date of agreement for transfer of the asset .

In short, actual income is not only relevan for levy of income tax.