Intricacies of Sec 43CA:
Introduction:
1. Tax on real estate or property transactions typically gets covered under capital gains. However, there are certain exceptions, like when such real estate is held as stock in trade.
2. In this case, the taxation would then need to be evaluated as business income. Regardless of the mannerism of taxation, real estate is often associated with black money, which also directly results in the proliferation of taxes.
Sec 50C:
In order to check this proliferation of tax, section 50C was introduced in the Income-tax Act, by virtue of which the stamp duty value assessed or assessable by the Stamp Valuation Authority is deemed as the full value of sale consideration received/accrued on sale of a capital asset, being land or building or both.
Intricacies of Sec 43CA:
1. Section 43CA shall apply only to land or building or both, held as stock in trade (builders). In order to determine the undervaluation of land or building, if any, in the sale agreement, section 43CA uses the value adopted by the Stamp Valuation Authority(SVA) on which stamp duty is payable, as per the State Government rules.
2. If the sale consideration received or claimed to be received by the seller on the sale of the land or building or both is less than the adopted by SVA, then such value adopted by SVA would be considered as the actual sales price received or accruing to the seller.
3. if the stamp duty value adopted by the SVA does not exceed 110% of the actual consideration, such actual consideration received/receivable by the taxpayer would be considered as the full value of consideration, and the tax would be computed accordingly.
4. If the seller does not accept the value adopted by SVA and believes that the stamp duty value determined is higher than the fair market value as on the date of transfer, he has an option to present its claim before the tax officer and request him to obtain the valuation of the property as per a valuation officer (‘VO’). In addition to the taxpayer requesting such reference to VO, another condition to be satisfied is that the value adopted by SVA has not been disputed in any revision or appeal before any Court or the High Court or any other authority.
