Currently, when a capital asset, being immovable property, is transferred for a consideration which is less than the value adopted, assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, then such value (stamp duty value) is taken as full value of consideration under section 50C of the Income-tax Act.
These provisions do not apply to transfer of immovable property, held by the transferor as stock-in-trade.
It is proposed to provide by inserting a new section 43CA that where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head “Profits and gains of business of profession”.
It is also proposed to provide that where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer.
However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement.
These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.
Impact of this amendment: After this section 43CA immovble property held as stock in trade i.e not as capital asset will be dealt in the same terms as capital asset is dealt u/s 50C.
Earlier the courts have held that section 50C is appliocable only in case oif immovable property sold as capital asset i.e value assessed/assessable by stamp valuation authority is considered as sales consideration for the purpose of calculation of capital gains, where such capital asset is sold at a price less than the value assessed/assessable by the stamp valuation authority.
Now to plugin this loophole section 43CA has been introduced whereby immovable properties held as stock in trade if sold at a consideration less than the value assessed/assessable by the stamp valuation authority then the consideration shall be deemed as equal to the stamp duty value for the purpose of calculating income under the head Profts and Gains from Business or Profession.
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