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Facts
The Revenue appealed the deletion of additions made by the AO. The additions pertained to the difference between sale deeds and state registration values for flats (Section 43CA) and disallowance of service tax and VAT (Section 43B). The CIT(A) deleted these additions.
Held
The Tribunal held that for Section 43CA, the stamp duty value on the date of allotment should be considered if sale consideration was received earlier. For Section 43B, if taxes were paid before the due date of return filing, disallowance is not warranted.
Key Issues
Whether Section 43CA of the Income Tax Act was correctly invoked considering the date of allotment vs. registration. Whether Section 43B disallowance for service tax and VAT is appropriate when paid before the return filing due date.
Sections Cited
43CA, 43B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “C” Bench, Mumbai.
Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
In this case, the Revenue filed an appeal on two issues - whether section 43CA of the I.T. Act was correctly invoked by the Ld. AO while passing the assessment order and the second issue relates to disallowance of certain payments made by the appellant under section 43B of the Act.
From the grounds of appeal, it is observed that Ground No. 1,2 and 3 relate to difference between the registration price mentioned in the sale Deeds and the value as per State Registration Department, with respect to five flats sold by the appellant. The Ld. AO made an addition of Rs. 3,36,77,000/- being the difference between these two values mentioned above.
The Ld. CIT(A) deleted the addition made by the Ld. AO, by noting that the price of flats for registration purposes should be taken as on the date of allotment of flats to the buyers of flats. In this case, the Ld. CIT(A) held that sale agreements were made by appellant with buyers of flats during F.Y.
2 M/s. Prarthana Enterprises 2004-05, whereas registration of these flats took place in F.Y. 2013-14. Section 43CA(3) of the Act clearly sys that the date of allotment should be taken for the purposes of invoking section 43CA of the Act. The only exception is that the consideration should be received fully/partly by any mode other than cash in the year of allotment. The Ld. CIT(A) deleted the addition stating that full sale consideration in 2007 with regard to one flat and in case of other four flats, part sale consideration was received in 2004 and 2005 by cheque and hence section 43CA(3) and (4) are applicable in this case as per which the date of allotment letter should be reckoned and not the date of actual registration. Accordingly, the addition was deleted.
The second addition made by the Ld. AO relates to service tax and VAT disallowance under section 43B of the Act. As far as service tax disallowance under 43B of the Act is concerned, the Ld. CIT(A) deleted the addition because the liability crystallized only in A.Y. 2014-15 and the payment was made before the due date for filing of Return of Income. Then, the addition made by Ld. AO under section 43B of the Act relating to VAT payment was deleted by Ld. CIT(A), because this amount was debited in profit and loss account for the first time in this year and the same was paid before filing the Return of Income.
Aggrieved by the Ld. CIT(A)’s deletion of additions made by the Ld. AO, the Revenue filed an appeal on both the issues, i.e., addition under section 43CA of the Act and addition under section 43B of the Act.
The Ld. DR initiated the arguments and explained about the additions made in the assessment order. For the reasons mentioned in the assessment order and based on the grounds of appeal, the Ld. DR pleaded that the additions may be sustained.
3 M/s. Prarthana Enterprises 7. The Ld. AR of the appellant has argued that section 43CA of the Act was not properly interpreted by the Ld. AO while making additions relating to the difference between Registration rate of cost of flats in the impugned year and the year of allotment. The rate at the time of actual registration should not be taken but the year of allotment of flat should be taken into consideration while comparing with registration rate prescribed by Government. As far as disallowance of service tax and VAT are concerned, the liability crystallized in this year and hence debited to profit and loss account and the amounts were paid before filing the Return of Income. Hence, the Ld. AR argued that the Ld. CIT(A) is correct in deleting both the additions made by the Ld. AO. The Ld. AR hence pleaded that the departmental appeal may be dismissed.
Heard both sides. The Bench finds considerable force in the arguments of Ld. AR of the appellant. Section 43CA(3) of the Act clearly says that when there is a delay in the registration of immovable property, the stamp duty value as on the date of agreement to sell the flat should be taken and not the stamp duty value as on the date of actual registration. In this case, full/part sale consideration was received by the appellant during the years 2004 to 2007 by cheque. Hence, the stamp duty value adopted by Ld. AO is incorrect as the value of A.Y. 2014-15 were taken into consideration by Ld. AO. While making additions. The twin conditions of correct date of allotment and full/part consideration received by cheque by the appellant as per section 43CA(3) and (4) are fulfilled. Hence, the Ld. CIT(A) has correctly deleted the addition of Rs. 3,36,77,000/-. So, the addition made by Ld. AO is deleted.
The second addition relates to disallowance under section 43B of the Act. The amounts paid by the appellant towards service tax and VAT. The Ld. AR of the appellant’s argument is valid because the levy of these taxes were challenged in the courts of law and the litigation went on for a consideration period. The liability to pay these taxes crystallized in this year
4 M/s. Prarthana Enterprises and hence the amounts were debited in this year by the appellant. The amounts were paid before filing the Return of Income which is not in dispute. In view of the same, section 43B cannot be invoked to make addition relating to service tax and VAT. Hence, there is no mistake in deleting the additions made by the Ld. AO with respect to section 43B of the Act. The additions made by Ld. AO w.r.t Service Tax and VAT are hence deleted, and the order of Ld. CIT(A) is upheld.
The Department’s appeal is dismissed. Order pronounced in the open Court on 16/06/2025.