2024 (8) TMI 1569 - AT - Income Tax

Addition invoking the provisions of Section 43CA r/w 50C - as against the sale consideration FMV has been determined at a higher figure - HELD THAT - Section 43CA talks about determination of full value of consideration as a result of transfer of an asset (other than a capital asset) being land or building or both for the purposes of computing the profits and gains from transfer of such asset. It envisages a situation where the value adopted or assessed or assessable by the authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer and in such a situation it has been provided that the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of the consideration for the purposes of computing profits and gains from transfer of such asset. Where the difference between the two values doesn t exceed 5% the actual consideration so received and accruing need to be considered and no adjustment is warranted. In the instant case in respect of Unit No. C214 the AO has considered the FMV basis DVO report at Rs 3, 34, 55, 169/- as against the actual sale consideration of Rs 3, 27, 03, 000/- and the difference of Rs 7, 52, 169/- is 2.25% of FMV value which is less than 5% as so provided in the statute. We find that there is no basis for any adjustment and considering any value other than what has been actually received by the assessee in respect of transfer of Unit No. C214. The addition u/s 43CA r/w 50C is hereby directed to be deleted. Appeal of the assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

- Whether the addition of Rs. 752,169 under Section 43CA read with Section 50C of the Income Tax Act, arising from the difference between the sale consideration and the fair market value (FMV) determined by the District Valuation Officer (DVO), was justified.

- Whether the provisions of Section 43CA read with Section 50C can be invoked when the difference between the sale consideration and FMV is less than 10%, specifically in the context of the sale of Unit No. C214.

- Whether the timing of recognition of sale consideration for Unit No. C214, which was booked in an earlier financial year but registered in the year under consideration, affects the applicability of Section 43CA read with Section 50C.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of addition under Section 43CA read with Section 50C on account of difference between sale consideration and FMV

Relevant legal framework and precedents: Section 43CA(1) of the Income Tax Act mandates that where the consideration received or accruing as a result of transfer of land or building is less than the value adopted or assessed by any State Government authority for stamp duty purposes, the latter value shall be deemed to be the full value of consideration for computing profits and gains. The proviso to this section provides a threshold: if the stamp duty value does not exceed 105% of the actual consideration received, the actual consideration shall be deemed to be the full value. This effectively means that if the difference between the stamp duty value and sale consideration is within 5%, the actual sale consideration is to be accepted without adjustment.

Court's interpretation and reasoning: The Tribunal emphasized the statutory language, noting that Section 43CA is triggered only when the sale consideration is less than the stamp duty value. It further noted the proviso which protects the assessee where the difference is within 5%, thereby precluding any upward adjustment.

Key evidence and findings: The DVO report valued Unit No. C214 at Rs. 33,455,169, while the actual sale consideration was Rs. 32,703,000. The difference of Rs. 752,169 constitutes approximately 2.25% of the FMV, which is below the 5% threshold.

Application of law to facts: Since the difference between the FMV and sale consideration was less than 5%, the proviso to Section 43CA(1) applies, mandating that the actual sale consideration should be accepted as the full value, and no addition is warranted.

Treatment of competing arguments: The Revenue contended that the addition was justified based on the DVO valuation. However, the Tribunal found this untenable because the statutory proviso explicitly excludes such minor differences from triggering the provisions of Section 43CA. The assessee argued that the difference was negligible and that the sale consideration had been accounted for in an earlier year, which the Tribunal also considered relevant.

Conclusions: The Tribunal concluded that the addition of Rs. 752,169 was not sustainable and directed its deletion.

Issue 2: Applicability of Section 43CA read with Section 50C when sale consideration was accounted for in an earlier year but sale deed registered in the year under consideration

Relevant legal framework and precedents: Section 43CA and Section 50C are triggered based on the value of consideration at the time of transfer, which is generally evidenced by the sale deed registration. However, the timing of recognition of income in the books of account and receipt of payment are relevant for determining the correct assessment year.

Court's interpretation and reasoning: The Tribunal noted that the assessee had received payment by account payee cheque and had booked the sale in the financial year 2015-16 relevant to AY 2016-17. The delay in registration of the sale deed was due to restrictions imposed by the Estate office, a factual circumstance beyond the assessee's control.

Key evidence and findings: The sale agreement date was 04/09/2015, and payment was received in that year. The sale deed registration occurred in the subsequent year under consideration (AY 2017-18).

Application of law to facts: Since the sale consideration was accounted for in the earlier year and the delay in registration was procedural, the invocation of Section 43CA read with Section 50C in the year of registration was misplaced.

Treatment of competing arguments: The Revenue relied on the sale deed registration date to invoke the provisions of Section 43CA read with Section 50C. The assessee argued that the sale consideration had been recognized earlier, and the registration delay should not affect the assessment.

Conclusions: The Tribunal held that the provisions could not be invoked in the year under consideration merely due to delayed registration, thereby rejecting the Revenue's argument.

3. SIGNIFICANT HOLDINGS

- "Section 43CA talks about determination of full value of consideration as a result of transfer of an asset (other than a capital asset), being land or building or both for the purposes of computing the profits and gains from transfer of such asset. It envisages a situation where the consideration received or accruing as a result of the transfer is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer."

- "Where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration."

- "In the instant case... the difference of Rs 7,52,169 is 2.25% of FMV value, which is less than 5% as so provided in the statute. In view of the same, we find that there is no basis for any adjustment and considering any value other than what has been actually received by the assessee in respect of transfer of Unit No. C214."

- The Tribunal established the principle that minor differences (less than 5%) between sale consideration and stamp duty value do not warrant invoking Section 43CA read with Section 50C, and the actual consideration must be accepted.

- The Tribunal also clarified that the timing of recognition of sale consideration in the books of account is relevant and that delayed registration of sale deed, due to external restrictions, does not justify invoking the provisions of Section 43CA read with Section 50C in a subsequent year.

- Final determination: The appeal was allowed, and the addition of Rs. 752,169 under Section 43CA read with Section 50C was deleted.