Sec. 43CA applicable even if agreement for sale was entered prior to date when said section came into force: ITAT

Short Overview of the case:

The issue involved was with regards to the applicability of Section 43CA of the Income-tax Act, 1961

 It was with regards to the Full value of consideration for transfer of assets other than capital assets in certain cases for the Assessment year 2014-15

Assessee-firm was engaged in business of real estate development and during relevant previous years sold three flats at value less than Fair Market Value as on date of registration of sale deed

Assessing Officer proposed to make addition under section 43CA on differential amount of consideration shown in document and Stamp Duty Valuation

Assessee contended before Assessing Officer that at point of time agreement for sale of flats in question were entered into with customer, section 43CA was not in Statute Book and, thus, provisions of section 43CA were not applicable

However, Assessing Officer did not accept this contention of assessee and made addition of differential amount under section 43CA

Issue before Jaipur ITAT was Whether transfer under provisions of section 43CA is recognized only when a registered document is executed and since in instant case, booking was claimed to have been made prior to 1-4-2013 whereas sale deeds were executed after 1-4-2013 which fell in previous year relevant to assessment year under consideration, provisions of section 43CA would be applicable for assessment year under consideration?

ITAT Jaipur held it as  yes 

The next issue was whether merely because an agreement had taken place prior to 1-4-2013 would not take away transaction from ambit of provisions of section 43CA –

Now again ITAT Jaipur held it as yes I.e., in favour of the revenue and against the assessee.

 

Conclusion:

1. Where assessee entered into an agreement for sale of flats with customer prior to 1-4-2013, however, sale deeds were executed after 1-4-2013 provisions of section 43CA will be applicable and, merely because an agreement had taken place prior to 1-4-2013 it would not take away transaction from ambit of provisions of section 43CA which were applicable for assessment year 2014-15 under consideration.

2. The issue has now become controversial as other ITAT has decided have decided the similar issue with reference to section 50C in favour of the assessee.