Section 43CA
Special provision for full value of consideration for
transfer of assets other than capital assets
Introduction Section 50C was enacted a decade ago under Chapter IV of the Act, which
deals with computation of capital gains arising from the sale of a capital
asset.
 This provisions was enacted to check the proliferation of black money in
property transactions by deeming the value assessed or assessable by the
Stamp Valuation Authority (in short, SVA) as the full value of consideration
received / accrued on sale of a capital asset, being land or building or both.
 To extend the ambit of deeming fiction to such cases, where such assets
are held as stock-in-trade, the Finance Act, 2013 has enacted section
43CA w.e.f. 1.4.2014, which falls in chapter-IV relating to the computation
of Business Income.
Applicability Applies to Land or Building or both, (other than capital asset)
 Will include, land, residential flat, commercial flat, industrial building
or plot, residential plot in a township, agricultural land whether in rural
or urban area etc.
 Both sections 50C and 43CA are applicable to transferor i.e. seller of such
immovable property.
 Applicable to whom?

all category of assessees
Section 43CA(1) - Stamp duty valuation to be deemed consideration
 Where the consideration received or accruing as result of transfer of an
asset (other than a capital asset) by an assessee, is less than the value
adopted or assessed or assessable by any authority of a State Government,
the value so adopted or assessed or assessable shall deemed to be the full
value of consideration received or accruing as a result of such transfer and
assessee shall be required to compute his taxable business income by
substituting the actual sale consideration with the above mentioned
deemed sale consideration.
Section 43CA(2)
 Like as per the provision of section 50C, the assessee can claim before the
A.O. that the value assessed / assessable by the SVA exceeds the FMV as
on the date of transfer and can ask him to refer the valuation of the
property to the Departmental Valuation Officer (DVO).
 If fair market value of the property determined by the DVO is less than
stamp duty value of the property, such fair market value shall be
considered for the purpose of applicability of the provision of section 43CA.
 If fair market value of the property determined by the DVO is more than
stamp duty value of the property, such stamp duty value shall be
considered for the purpose of applicability of the provision of section 43CA.
Section 43CA(3) & (4) - Stamp duty valuation on the date of sale agreement
 Sub section (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 may be taken as 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.
 Sub section (4)- The provisions of sub section (3) shall apply only in a case
where, the amount of consideration or a part thereof received on or before
date of agreement by any mode other than cash.
 Issues related to the meaning of transfer under section 43CA For the purpose of this section, definition of the term “transfer” given
u/s 2(47) cannot be applied. Because section 2(47) is in relation to
transfer of a “capital asset” whereas section 43CA deals with property
held in the nature of stock in trade.
 Therefore the meaning of the term 'transfer' for the purpose of section
43CA shall depend upon the accepted method of accounting regularly
maintained by the assessee.
Section 56(2)(vii)(b)
Immovable property received for inadequate
consideration w.e.f. 01-04-2014
Introduction As per the provision of section 50C, if land or building is transferred for a
value less than the stamp duty value and the property is in the nature of
capital asset, the difference is taxed in the hands of the transferor as
deemed Capital Gain.
 The provision of the section 43CA as well as section 50C are applicable to
transferor i.e. seller of the land or building or both whereas the provision of
section 56(2)(vii)(b) is applicable to transferee i.e. purchaser of the property.
Applicability Which types of assets are covered by this provision?
Only Immovable Property being
 Land or Building or both
Any property other than immovable property mentioned above is not
covered by 56(2)(vii)(b) but covered by Section 56(2)(vii)(c)
 Applicable to whom
 Individual or
 HUF
Section 56(2)(vii)(b)- Taxability
inadequate consideration
of
Immovable
property
received
for
 Where any immovable property is received for a consideration which is less
than the stamp duty value by an amount exceeding fifty thousand rupees,
the stamp duty value of such property as exceeds such consideration shall
be chargeable to tax in the hands of an individual or HUF as income from
other sources.
 This section is not applicable, where the property is received without
consideration from relative or on account of marriage, etc.
Section 56(2)(vii)(b) - Stamp duty value on the date of agreement to be
treated as fair market value
 If there is a time gap between the date of the agreement fixing the amount
of consideration for the transfer of immovable property and the date of
registration, the stamp duty value on the date of the agreement may be
considered.
 This provision shall apply only in case where the amount of consideration
or a part thereof received on or before date of agreement by any mode other
than cash.
The effect of sale of property on payment of tax under section 56(2)(vii)(b) in
case of Capital Asset:
 Cost of acquisition as per section 49(4) shall be deemed to be the value
which has been taken into the account for the purpose of clause (vii) or
clause (viia) of 56(2).
 Trading Asset (stock-in-trade):
 If an individual or HUF has acquired the immovable property as trading
asset, the enhanced value of such asset cannot be accounted for in the
books of accounts by the assessee.
 Further individual or HUF has acquired the immovable property (e.g.
Building) as trading asset, he also cannot claim depreciation on the
enhanced value of the asset.
Practical issues arise in the applicability of the
section 43CA and section 56(2)(vii)(b)
Practical Issues What is the meaning of term “transfer” u/s 43CA?
 Manner of Applicability of provision of section 43CA when real estate
developer applies Percentage of Completion Method for revenue
recognition.
 Whether effect of section 43CA is to be given in the books of accounts?
 Builder make an agreement for sale in a newly launched project at a
price of Rs. 5 lacs (Market price on that date is Rs. 7 lacs).
Subsequently, the investor cancels the deal and settles the deal at Rs. 7
lacs and took the difference of Rs. 2 lacs. Whether the provisions of
section 43CA will apply?
 What would be the situation if the investor cancels the deal and settles
for the same amount of Rs. 5 lacs?
 If a builder sells the right in Flat before the construction is completed –
Will the provision of section 43CA be attracted?
 If buyer has already shown possession of the property long back and
builder has also shown sale in his return of income in previous years
and now the said property is getting registered in the F.Y. 2013-14
where SDV is higher than the sale price even on the agreement date
then whether
1. AO can reopen the case for the earlier year of seller as well as
buyer?
2. What would be the tax effect for A.Y. 2014-15?
 In case of sale of agricultural land situated beyond the specified limit
whether provision of section 43CA and section 56(2)(vii)(b) are
applicable?
 In case of gift of agricultural land situated beyond the specified limit,
whether section 56(2)(vii)(b) is applicable?
 In case the stamp duty of the excess amount over actual consideration
is paid by
 purchaser in case of section 43CA &
 seller in case of section 56(2)(vii)(b)
 Planning - Claim of bad debts U/s. 36(1)(iii)
 Planning - Payment by cheque
 bearer
 cheque not presented
 In case of development agreement what would be incidence of tax?
 What if the difference between stamp duty value at the time of
agreement and stamp duty value on the date of acquisition is more due
to subsequent fall in property prices?
 Whether the agreement made at the time of fixing the consideration
should be subject to Stamp Duty or notarized agreement or simple
agreement?
 Whether sub-section (3) & (4) of section 43CA as well as provisos of
section 56(2)(vii)(b) are applicable in the following cases:
 Letter of allotment is issued
 Receipts containing the nature of transaction for amount received
by cheque is issued
 What if the Individual/HUF purchases immovable property such as land
or building in consideration of Unlisted Equity Shares of the Pvt. Ltd
Company exceeding Rs. 50,000/- ?
 What if company in which public are not substantially interested
purchases immovable property such as land or building in consideration
of its equity shares?
 What would happen if the property is acquired by Government or
sold/purchased in auction by DRT, etc. at price less than the SVA?
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