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Stamp Duty Valuation Complimented with Delhi Govt Circle Rate Notification In Force As on Date

1. Delhi Govt Vide No. F. 1(2854)/Regn.Br./Div.Comm./HQ/2020/5453 dated 26th February 2021; notified revised circle rates for registration of instruments relating to lands and immovable properties in Delhi by all the Registering Authorities under the provisions of the Indian Stamp Act, 1899 (2 of 1899) and the Indian Registration Act, 1908 (XVI of 1908); by 20% reduction in the Circle Rates.

2. The above said Delhi Govt reduced circle rate effect was extended from 30th September 2021 till 31st December 2021.

3. Section 43CA and Section 50C of the Income Tax Act has envisaged safe harbour rules upto the range of 10% being the upper prescribed limits of the sale consideration.

4. An important point to be taken care of in case of Sale of a capital asset, being land or building or both, whether held as stock in trade Or held as a capital asset; as per section 43CA or Section 50C; respectively and the Delhi Govt Circle Rate Notification; is that the buyer and seller can take the benefit of safe harbour rules of 10% on the reduced circle rates.

5. As per the Delhi Govt notification, the reduced circle rates were defined in absolute values. The notification did not read as the original circle rates are reduced by a certain percentage of 20% and rather the new effected circle rates were duly defined with absolute figures.

6. If the safe harbour rules within the range of 110% of the sale consideration; falls within the value adopted for payment in the reduced circle rate of 20%, then in that case, the buyer and seller can take advantage of the beneficial provisions.

EXTRACT OF THE BARE ACT

Section – 50C, Income-tax Act

Special provision for full value of consideration in certain cases.

50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer :

Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer:

Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account 39[or through such other electronic mode as may be prescribed40], on or before the date of the agreement for transfer:

Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and 41[ten] 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 section 48, be deemed to be the full value of the consideration.

(2) Without prejudice to the provisions of sub-section (1), where—

(a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;

(b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

Explanation 1.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

Explanation 2.—For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.

Stamp Duty Valuation Complimented with Delhi Govt Circle Rate Notification In Force As on Date

(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.

Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.

43CA.(1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, 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, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer:

Provided that 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 91[ten] 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:

92[Provided further that in case of transfer of an asset, being a residential unit, the provisions of this proviso shall have the effect as if for the words “one hundred and ten per cent”, the words “one hundred and twenty per cent” had been substituted, if the following conditions are satisfied, namely:—

(i) the transfer of such residential unit takes place during the period beginning from the 12th day of November, 2020 and ending on the 30th day of June, 2021;

(ii) such transfer is by way of first time allotment of the residential unit to any person; and

(iii) the consideration received or accruing as a result of such transfer does not exceed two crore rupees.]

(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).

(3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.

(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account 93[or through such other electronic mode as may be prescribed94] on or before the date of agreement for transfer of the asset.

95[Explanation.—For the purposes of this section, “residential unit” means an independent housing unit with separate facilities for living, cooking and sanitary requirement, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.]

Illustration with respect to the above said notification:

Table 1 for Minimum Land Rate for Residential Use- For Category D

The Reduced Circle Rate for Category D is 102,144 for 100 sq mtrs is 102,14,400.00

Applying 10% safe harbour rules on the above amount, if the sale consideration is 92,86,000.00 x 110% = 102,14,600.00; then the sale consideration of 92,86,000.00 can be safely adopted.

In case, the market value of the capital asset is significantly reduced by 10% over and above the 20% reduction in stamp valuation, in that case, the seller and buyer can safely consider the sale consideration as above, and get the instrument registered within the time limit of 31st December 2021.

The interplay of the Section 43CA and Section 50C with the Delhi Govt circle rate reduction notification can be advantageous for the buyers and sellers in Delhi, if they get the instrument registered before 31st December 2021.

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