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This is an appeal filed by the assessee against the order of the ld CIT(A) -1 Coimbatore dated 15/12/2023 pertaining to Assessment Year 2017-18 wherein the assessee has taken the following grounds of appeal:
1. That the Ld. OT(A) has erred by sustaining the addition of Rs 752169/- under section 43CA read with 50C of Income tax Act.
2. That the Ld. CIT(A) has wrongly confirmed the addition of Rs 752169/- under section43CA read with Section 50 C of Income tax Act on account of difference between sale consideration and FMV determined by DVO without appreciating the fact that difference was less than 10%.
Briefly the facts of the case are that the assessee is engaged in the business of commercial development and sale of office spaces. During the year under consideration, sale deeds were registered in respect of Unit No. B509, B506, B311 and C214 and the AO, after calling for the information/explanation from the assessee, invoked the provisions of Section 43CA r/w 50C of the Act and an amount of Rs 31,45,300/- was brought to tax and as against the returned loss of Rs 67,48,98,414/-, the assessed loss was determined at Rs 67,17,53,114/- and the relevant findings of the AO are contained at para 2.5 of the assessment order passed u/s 143(3) dated 21/12/2019 and the contents thereof read as under:
2.5 Further, it is observed that in previous assessments for A.Y. 2014-15 and A.Y. 2015-16, the total additions made u/s 143(3) was rectified in view of DVO report. The assessee has challenged the adoption of collectorate rate for the sale of office spaces. Therefore, Ld. CIT(A) referred the matter back to A.O. with directions to refer the case to DVO, for valuation of FMV of office spaces. It is observed from the DVO report dated 04.04.2019 that for A.Y. 2014-15, the DVO has taken for 3rd/5th floor office space as 10,500 per sq.ft for A.Y. 2015-16 for 2nd floor the FMV rate is taken as 11,253 per sq.ft. The argument of the assessee that as per section 43CA(3), the FMV value at the date of agreement to transfer be adopted in case there is a difference between date of agreement and date of sale deed is acceptable. Therefore, to calculate the FMV of the office spaces No. B-509, B-506, B-311 and C- 214, the date of agreement i.e. 11.10.2013, 11.03.2011, 30.04.2013 and 04.09.2015 is considered and FMV at the end of respective F.Y. is considered. Therefore, the net addition u/s 43CA read with section 50C in accordance with the valuation done by DVO in preceding assessment years 2014-15 and 2015-16 is as under:-
Address Area Difference Unit Consideration FMV Fair market SI. No. No. Rate value as (Sq.Ft.) Received adopted determined 1 B509 4414 47579800 10500 46347000 1232800 Fifth Floor, Elante office suite 2 B506 5000 53000000 10500 52500000 500000 Fifth Floor, Elante office suite 3 B311 Third Floor, 2825 31075000 10500 29662500 1412500
Elante office suite 4 C214 Second Floor, 2973 32703000 11253 33455169 Taken as Nil Elante office being sale suite consideration is more than FMV TOTAL 164357800 Rs. 31,45,300/-
In view of the above Rs. 31,45,300/- is taken as the income of the assessee for the year under consideration on account of difference between sale consideration and FMV of the office space registered during the year is added back to the income of the assessee.
Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has held that since sale consideration is higher than FMV in respect of Unit No. B509, B506 and B311, the provisions of section 43CA r/w 50C cannot be attracted and necessary relief was granted to the assessee. However, in respect of Unit No. C214, it was held by the ld CIT(A) that as against the sale consideration of Rs 3,27,03,000/-, the FMV has been determined at a higher figure of Rs 3,34,55,169/-, the differential of Rs 752,169/- has to be brought to tax u/s 43CA r/w 50C of the Act. Against the addition of Rs 752,169/-, the assessee is now in appeal before us.
During the course of hearing, the ld AR submitted that in respect of Unit No. C214, the assessee had received account payee cheque from allottee on 04/09/2015 and the sale has been booked and accounted for in the books of accounts during the financial year 2015-16 relevant to assessment year 2016-17. It was submitted that due to certain restrictions imposed by the Estate office, sale deed couldn’t be registered in earlier year and it has been registered during the year. It was submitted that the Revenue has accepted the sale booked in the financial year 2015-16 relevant to assessment year 2016-17 and only on account of registration of sale deed during the year, the provisions of section 43CA r/w 50C has been invoked. In the said factual background, it was submitted that firstly provisions of section 43CA r/w 50C has been wrongly invoked in the year under consideration. It was further submitted that difference between the sale consideration and FMV is only 2.3% which is less than 10% and in view of the settled position as held by the various Benches of the Tribunal as well as subsequent amendment in the provisions of section 43CA r/w 50C, the said difference deserve to be ignored and no addition therefore required to be made u/s 43CA r/w 50C of the Act.
Per contra, the ld DR has relied on the order of the lower authorities.
We have heard the rival contentions and purused the material available on record. The provisions of section 43CA(1) which has a bearing on the matter under consideration at the relevant point in time read as under:
“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 five 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.”
Section 43CA talks about determination of full value of consideration as a result of transfer of an asset (other than a capital asset), being land or building or both for the purposes of computing the profits and gains from transfer of such asset. It envisages a situation where the consideration received or accruing as a result of the transfer 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. In such a situation, it has been provided that the value adopted or assessed or assessable by such authority shall be deemed to be full value of consideration which can be considered and actual consideration has to be ignored for the purposes of computing the profits and gains from transfer of such asset. At the same time, it envisages a situation where the value adopted or assessed or assessable by the authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, and in such a situation, it has been provided that the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of the consideration for the purposes of computing profits and gains from transfer of such asset. In other words, where the difference between the two values doesn’t exceed 5%, the actual consideration so received and accruing need to be considered and no adjustment is warranted.
In the instant case, in respect of Unit No. C214, the AO has considered the FMV basis DVO report at Rs 3,34,55,169/- as against the actual sale consideration of Rs 3,27,03,000/-, and the difference of Rs 7,52,169/- is 2.25% of FMV value, which is less than 5% as so provided in the statute. In view of the same, we find that there is no basis for any adjustment and considering any value other than what has been actually received by the assessee in respect of transfer of Unit No. C214. The addition of Rs 7,52,169 u/s 43CA r/w 50C is hereby directed to be deleted.
In the result, the appeal of the assessee is allowed.