Section 43CA – Special provision for full value of consideration for transfer of assets other than capital assets in certain cases

Issue/Justification

This section provides for adoption of stamp duty value in case of transfer of land or building or both held as stock-in-trade. Several issues have cropped up due to implementation of this section in its present form and suggestions thereof are as under:

a) This amendment encourages structuring of real estate transactions in such a manner to circumvent increased tax liability arising on account of adoption of stamp duty value. For example- Having agreed to sell the property at Rs. 80 Lakhs, as against the value of Rs. 100 Lakhs considered for stamp duty purposes, the transaction may be structured to record the transaction value at Rs.100 Lakhs with a rebate of Rs. 20 Lakhs.

Suggestion

a) The section in its present form may not be desirable and may lead to structuring of transactions. Thus, the provision of this section needs to be reconsidered.

(SUGGESTIONS FOR RATIONALIZATION OF THE PROVISIONS OF DIRECT TAX LAWS)

Issue/Justification

b) This provision results in double taxation of income, since, the difference between the stamp duty value and actual consideration would be taxable in the hands of the seller. However, the buyer can claim only the actual cost as deduction while computing his business income or capital gains arising at a later point of time when he sells the asset.

Suggestion

b) Suitable provisions may be incorporated in the statute so that the same income is not subject to tax twice.

Issue/Justification

c) This section provides for adoption of stamp duty value on the date of agreement, where the date of agreement is different from the date of registration, provided at least a part of the consideration has been received on or before the date of agreement by any mode otherwise than by way of cash. In this context, it may be clarified whether “otherwise than by way of cash” would include transfer by book entries, transfer by Hundi, promissory notes etc. and transfer by exchange agreement.

Suggestion

c) It may be clarified as to whether the term “otherwise than by way of cash” would include transfer by book entries, transfer by Hundi, promissory notes etc. and transfer by exchange agreement.

Issue/Justification

d) Further, in a case where the year of agreement and the year of registration are different, a clarification is required as to whether the tax liability would arise in the year of agreement or year of registration or the year in which possession is obtained.

Suggestion

d) It may be clarified as to whether the tax liability would arise in the year of agreement or year of registration or the year in which possession is obtained.

Issue/Justification

e) Since only capital assets are excluded from the applicability of this section, agricultural land which is not included in the definition of capital asset may fall within the scope of this section. Therefore, specific exclusion of agricultural land from the ambit of this provision may be provided for.

Suggestion

e) It is suggested that agricultural land be specifically excluded from the ambit of this provision.

Issue/Justification

f) This section provides for adoption of stamp duty value in case of “transfer” of land or building or both held as stock-intrade. It may be noted that the definition of term “transfer” in section 2(47) is in relation to a capital asset only. The intended scope of coverage of the term “transfer” for the purpose of section 43CA needs to be defined.

Suggestion

f) It is suggested that the term “transfer” be specifically defined for the purposes of section 43CA.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)
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Category : Income Tax (27901)
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Tags : Budget (1957) Budget 2018 (400) ICAI (2673)

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