SATISH JAMNADAS DATTANI ,MUMBAI vs. DCIT CENTRAL CIRCLE 4(2)(1), MUMBAI

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: This appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”] dated 11.12.2025 for Assessment Year 2018-19 in sustaining the addition made by the Assessing Officer in respect of the difference in value between the stamp duty and the market value as compared to agreement to sell entered into by the assessee in respect of unfinished flats in the projects carried out in Linear, Vertex and Prism.

“4.1 Ground No. 1 - Addition of Rs.44,88,747/- u/s 43CA of the Act 4.1.1 Relevant Facts The AO, after comparing the agreement values of certain flats in the assessee's projects 'Prism' and 'Linear' with the corresponding stamp duty valuations, found that in each case the latter exceeded the former. Applying section 43CA, the AO treated the difference as deemed consideration, proportionately to the percentage completion method adopted by the assessee, resulting in an addition of Rs.44,88,747. The assessee's contention is that the said transactions involved only transfer of rights in properties under construction, as the Occupation Certificates for both projects were issued much later (post October 2020), and thus section 43CA, which applies to transfer of land or building or both, is not attracted. The assessee also pointed out that some of the differences fell within the statutory tolerance limit of 5%, and that no DVO reference was made despite objection to the valuation. 4.1.2 Arguments of the Appellant First, the appellant argues that the core precondition for invoking section 43CA-transfer of land or building or both was not met, as the agreements pertained to under-construction properties, with possession and completion post-dating the relevant period. Second, the appellant stresses that in terms of judicial interpretation, including the Mumbai ITAT's decision in Shree Laxmi Estate Pvt. Ltd. v. ITO, rights in property under construction are distinguishable from completed immovable property, and section 43CA should not apply. Third, it is submitted that in several instances, the variation between agreement value and stamp duty value was less than 5%, thereby falling within the permissible safe harbour (proviso to section 43CA(1), as amended). Fourth, the appellant asserts that once the assessee disputed the stamp duty valuation, the AO was duty-bound under section 50C(2), read with section 43CA(2), to refer the matter to the DVO. 4.1.3 Arguments of the Assessing Officer The AO has relied on the plain language of section 43CA, deeming stamp duty valuation as full consideration whenever it exceeds the agreement value in the case of land or building held as stock-in-trade. The AO observed that the registered agreements clearly relate to immovable property and that the provision is not limited to cases of completed construction. Furthermore, the AO considered the percentage completion adjustment as adequate compliance with the revenue recognition method followed by the assessee. No DVO reference was made on the ground that the stamp duty valuation is conclusive for the purpose of section 43CA. 4.1.4 Analysis and Decision I have carefully considered the facts, the statutory framework, and submissions. Section 43CA(1) mandates substitution of consideration with stamp duty value in computing business income where the former is less. However, the provision applies to "transfer of an asset (other than a capital asset), being land or building or both." The legislative phrase "land or building or both" has been judicially interpreted to connote completed immovable property and not merely rights in such property under construction. In the present case, the assessee has produced the Occupation Certificates dated post October 2020 for both projects, which supports the contention that at the time of execution of the agreements, the subject properties were under construction. The agreements themselves reserve rights 4 for the assessee to complete construction and deliver possession. On these facts, I find merit in the appellant's contention that section 43CA is not applicable to these transactions. Additionally, the AO's inclusion of differences below the tolerance threshold lacks equitable basis. Most crucially, once the assessee objected to the adoption of stamp duty value, section 43CA(2), read with section 50C(2), obligated the AO to consider the matter for valuation. In light of these factual and legal considerations, and guided by coordinate bench rulings (including Shree Laxmi Estate Pvt. Ltd., ITA No. 5554/Mum/2016), the addition of Rs.44,88,747 is not sustainable. Accordingly, Ground No. 1 is allowed.”

“5.7. We have heard the rival submissions. We find that the Id AR at the outset argued that even if the provisions of section 43CA of the Act are to be made applicable to the facts of the instant case, then the difference in value cannot be treated as 'suppressed sale' in as much as the difference in value is to be brought to tax only pursuant to deeming fiction created in the statute in terms of section 43CA of the Act. The deeming fiction is in respect of treating the stamp duty value value as full value of consideration for the purpose of computing the profits of the assessee in respect of real estate projects / development projects. Though we agree with this argument of the Id AR in principle, but, in our considered opinion, it does not in any way change the computation of total income of the assessee as ultimately the difference between the agreement value and the stamp duty value is to be brought to tax in terms of section 43CA of the Act. Hence we hold that the expression 'suppressed sales' used by the Id AO and upheld by the Id CITA is totally unwarranted as the addition is only made by applying the deeming fiction provided in section 43CA of the Act. 5.7.1. It is not in dispute that the assessee had not reported any sales from sale of units during the year under appeal in view of the fact that it is following project completion method and since the project was completed in Asst Year 2015-16, the assessee had reported the sale of units as its turnover in Asst Year 2015-16 by declaring the agreement value as the full value of consideration. It is not in dispute that the assessee had not sold any land or building or both in respect of any of the units during the year under appeal. We find that the assessee had only registered the agreement during the year under appeal, wherein, it is very clearly stated that the subject mentioned property (i.e., the property proposed to be transferred by the assessee to the ultimate flat buyers) was still under construction and that the ultimate flat owners shall allow the assessee to enter upon the subject mentioned property premises to complete the construction of the flats as agreed upon in the said agreement which was subject matter of registration with the stamp duty authorities. In other words, the agreement that was registered with the stamp duty valuation authorities was only the 'property under construction' and not the property per se. In these circumstances, whether the provisions of section 43CA of the Act could at all be applied is to be seen. We are conscious of the fact that the provisions of section 43CA of the Act are applicable only when there is transfer of land or building or both. In the instant case, neither of those had happened pursuant to registration of agreement with the stamp duty valuation authorities. In respect of allotment of offices made prior to 31.3.2013, we find from the documents enclosed in the paper book that the assessee and the prospective buyer of flats had specifically agreed that till such time the agreement of sale is executed and registered, no right is being created in favour of the flat buyer and that the allotment letter is just a confirmation of booking subject to the execution of the agreement which is to be drafted at a later point of time. The said allotment letter also specifies that the relevant office has been allotted to the flat buyer with rights reserved to assessee to amend the building plan as it may deem fit. Accordingly, the flat buyer is bound to accept unconditionally and confirm that any kind of increase or decrease in the area of the said office or shift in the position of the said office, if arises, due to amendment in the plan etc and in case of variation of the area, the value of the office shall be proportionately adjusted. All these documentary evidences clearly go to prove that the assessee had not completed the construction of the office during the relevant year. It could also be inferred that pursuant to registration of agreement with the stamp duty valuation authorities, a right is created in favour of the flat buyer. Hence what the assessee had transferred pursuant to registration of the agreement was only the rights in the flat/ office (which is under construction) and not the property per se. Hence it could be safely concluded that there was no transfer of any land or building or both by the assessee in favour of the flat buyers pursuant to registration of the agreement in the year under appeal. Hence we hold that the provisions of section 43CA of the Act cannot be made applicable to the same. Reliance in this regard is placed on the following decisions of co- ordinate benches of tribunals :- a) Ahmedabad Tribunal in the case of ITO vs Yasin Moosa Godil in ITA No. 2519/Ahd/2009 dated 13.4.2012 wherein it was held as under:- "16. From the reading of Sec. 50C, it is evident that Sec. 50C is a deeming provision and it extends to only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by any authority of State Government therefore for the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Clearly therefore, it is essential that for application of Sec.50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as "land or building or both" then section 50C will cease to apply. From the facts of the case narrated above, it is seen that the assessee has transferred booking rights and received back the booking advance. Booking advance cannot be equated with the capital asset and therefore section 50C cannot be invoked." b) Jaipur Tribunal in the case of Mrs Rekha Agarwal vs ITO reported in (2017) 79 taxmann.com 290 (Jaipur Trib.) dated 17.2.2017 "2.9 On close reading of the above documents, the existence and contents thereof have not been denied by the Revenue, it is clear that firstly what has been purchased initially by the assessee alongwith her husband is the right of allotment in the office flat measuring 2500 sq.ft. in the Medi City project which was under development at Sector 38, Gurgaon. It is also clear that from the perusal of the agreement of Conveyance dated 23.07.2010 that what has been sold is again a right of allotment of the said flat in the Medi City project. The said fact is apparent from the fact that the balance 10% consideration of Rs. 3,75,000/- which was supposed to be paid to the developer at the time of possession of the flat in terms of the original MOU dated 22.12.2004 had still not been paid and it has now been agreed that the said 10% balance consideration shall be paid directly by the purchaser namely S.A.S. Servizio (P) Ltd., A-10/6 Vasant Vihar, New Delhi. Further, it has been agreed that the purchaser has gone through the MOU dated 22.12.2004 and shall agree with the contents thereof. Further, what has been physically handed over to the buyer of theproperty is the original MOU as well as the original payment receipt issued by the developer M/s. Global Heal (P) Ltd. On a combined reading of all these clauses which are mutually agreed upon between both the parties, it is clear that what has been transferred is a right of allotment in the property which was under construction and possession thereof was not taken by the assessee and hence, 7 there is no question of transfer of the possession of the said property. Further, other than these agreements and MOU, there is nothing in terms of any positive tangible evidence which has been brought on record by the Revenue to support its position that it is the flat which has been transferred by the assessee. After the assessee has submitted to the AO vide its letter dated 12.03.2014 that the property was under consideration at the time of the sale and no sale deed was executed, the AO has not carried out any further investigation with the developer to refute the contentions raised by the assessee. In result, on perusal of the documents available on record, the contention of the assessee remains uncontroverted. It is the right in the property by way of right of allotment which has been assigned by the assessee in favour of the buyer and not the property itself. 2.10 The next question that arises for consideration now is whether the provisions of section 50C are applicable in respect of right of allotment in the property. In this regard, we refer to the provisions of section 50C(1) of the Act which reads as under: "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." 2.11 On reading of sub-section (1) of section 50C, it is clear that the value of land, building or both adopted or assessed or assessable by the Stamp Valuation Authority shall for the purpose of section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. It is a deeming provision and it extent only to land, building or both. It therefore follows that where a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the Stamp Valuation Authority, the deeming provisions of sub section(1) of section 50C shall be applicable. In the instant case what has been transferred is a right of allotment in office flat and not the office flat itself. It is therefore clear that a deeming provision which is limited to land, building or both cannot be extended beyond the purpose for which it is enacted and is therefore not applicable in the instant case. The Ld. ARhas relied on the Coordinate Bench's decision in the case of Atul G. Puranik (132 ITD 499) (Mum Trib) supra which squarely supports the case of the assessee. In that case, the assessee was allotted lease right in a plot for a period of sixty years. The relevant finding of the Coordinate Bench contain at para 11.4 of its order is reproduced as under: 8 "In view of the aforenoted judgements rendered by the Hon'ble Apex Court and that of the Hon'ble Jurisdictional High Court, it is clear that a deeming provision can be applied only in respect of the situation specifically given and hence cannot go beyond the explicit mandate of the section. Turning to S. 50C, it is seen that the deeming fiction of substituting adopted or assessed or assessable value by the stamp valuation authority as full value of consideration is applicable only in respect of "land or building or both". If the capital asset under transfer cannot be described as 'land or building or both', then s. 50C will cease to apply. From the facts of this case narrated above, it is seen that the assessee was allotted lease right in the plot for a period of sixty years, which right was further assigned to M/s. Pathik Construction in the year in question. It is axiomatic that the lease rights in a plot of land are neither 'land or building or both' as such nor can be included within the scope of 'land or building or both'. The distinction between a capital asset being 'land or building or both' and any 'right in land or building or both' is well recognized under the IT Act. Sec. 54D deals with certain cases in which capital gain on compulsory acquisition of land and building is charged. Sub-s. (1) of S. 54D opens with 'subject to the provisions of sub-s. (2), where the capital asset, being land or building or any right in land or building, forming part of an industrial undertaking..." It is palpable from s. 54D that 'land or building' is distinct from 'any right in land or building'. Similar position prevails under the WT Act, 1957 also. Sec. 5 (1) at the material time provided for exemption in respect of certain assets. Clause (xxxii) of s/5(1) provided that "the value, as determined in the prescribed manner, of the interest of the assessee in the assets (not being any land or building or any rights in land or building or any asset referred to in any other clauses of this sub-section) forming part of an industrial undertaking" shall be exempt from tax. Here also it is worth nothing that a distinction has been drawn between 'land or building' on one hand and 'or any rights in land or building' on the other. Considering the fact that we are dealing with special provision for full value of consideration in certain cases under s. 50c, Which is a deeming provision, the fiction created in this section cannot be extended to any asset other than those specifically provided therein. As Sec. 50C applies only to a capital assets, being land or building or both, it cannot be made applicable to lease rights in a land. As the assessee transferred lease rights for sixty years in the plot and not land itself, the provisions of S.50C cannot be invoked. We, therefore,hold that the full value of consideration in the instant case be taken as Rs. 2.50 crores." 2.12 In light of above facts and circumstances of the case and taking into consideration the decision of the Co-ordinate Bench referred (supra) we are of the view that what has been transferred by the assessee is a right of allotment in the property and not the actual property itself and in respect of such rights, the deeming provisions of section 50C are not applicable. The ground taken by the assessee is accordingly allowed. In the result the appeal filed by the assessee is allowed." We find that the aforesaid decisions are directly applicable to the facts of the case before us. In view of our aforesaid observations in the facts and circumstances of the case, we hold that the provisions of section 43CA of the Act could not be made applicable to the issue in dispute before us. In view of this finding, the other arguments advanced by the Id AR with regard to the fact that the Id AO ought to have made reference to the Id Departmental Valuation Officer (DVO) in the light of provisions of section 43CA(2) of the Act which is analogous to provisions of section 50C(2) of the Act need not be gone into as it becomes academic in nature. Accordingly, the grounds raised by the assessee are allowed.”

Order pronounced in the open court on 29/07/2026

Sd/- Sd/- MAKARAND VASANT MAHADEOKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 29/07/2026 Prabhat Copy to:

SATISH JAMNADAS DATTANI , LAXMI SHOPPING CENTER, V.L. ROAD, 1 MUMBAI-400067, MAHARASHTRA

DCIT, CENTRAL CIRCLE 4(2)(1), GROUND FLOOR, AAYAKAR BHAVAN, 2 MK ROAD,, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE