Taxpublishers.in - Monday Corner Answer to the Quiz for the week (31 Mar 2025)

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Quiz for the week (31 Mar 2025): Diwaker acquired an apartment for Rs. 160 lakhs from XY Builders P Ltd and the document was executed and registered in December, 2024 and the stamp duty value at the time of registration of the document was Rs.200 lakhs. Both the parties had agreed for the said transaction in April, 2023 when the stamp duty value of the property was Rs. 170 lakhs. Advance payment of Rs.25 lakhs through online banking was made in April,2023. Though an agreement was entered in to in writing, it was not registered. Discuss the implication of the transaction in the hands of both the parties. Best Answer : In this case, Diwakar is acquiring a property (apartment) for Rs.160 lakhs and whereas the stamp duty value was Rs.200 lakhs at the time of registration of document. Section 194-IA deals with deduction of tax at source in respect of payment on transfer of immovable property other than agricultural land. When a transferee is responsible for paying to a resident transferor any sum by way of consideration for the transfer of immovable property being land (other than agricultural land) or building or both, tax is deductible at source if the consideration is Rs.50 lakhs or more. The quantum of tax deduction at source is the actual consideration or the stamp duty value whichever is higher. There is no safe harbour as regards the difference between the sale consideration and stamp duty value. Since it is stated that the stamp duty value is Rs.200 lakhs the tax deduction at source will be on the said amount and not the actual consideration. Therefore, the amount of tax deductible at source would be Rs.2,00,000. In this case, there is an agreement between the parties but it was not registered. However, the payment was made in pursuance of the agreement and made through banking channel. There is an agreement or letter of allotment given by the vendor after receipt of the token advance. In Tamojit Das v. ITO (ITA No.1200/Kol./2024 dated 3rd October, 2024) a similar issue came up before the tribunal. The assessee admitted the actual sale consideration being Rs.24.06 lakhs as against the stamp duty value of Rs.38.75 lakhs. The assessee claimed that he had paid advance amount through banking channel and furnished copy of receipt issued by the vendor, the letter of allotment and copy of the floor plan to be allotted to the assessee. The tribunal held that the copy of the allotment letter and the payments made through banking channel show that the allotment letter is to be equated to an agreement of sale. The agreement is not required to be a registered document. The only requirement in law is that there should be an agreement and the payment should follow the same and through banking channel. Since the assessee could prove the genuineness of the agreement and the payments made through banking channel, the conditions of proviso, further proviso and third proviso to section 56(2)(x) stand satisfied. Therefore, the difference between the actual sale consideration and stamp duty value on the date of agreement is also less than 10%. Hence no amount is liable to be taxed in the hands of the buyer i.e. Diwaker. Similarly, as regards the vendor section 43CA would be applicable. Sub-section (3) mandates an agreement and sub-section (4) mandates payment of consideration through banking channel. Both these conditions are satisfied and therefore the vendor XY Builders (P) Ltd is also not hit by section 43CA. The actual sale consideration would be considered for the purpose of section 43CA and not the stamp duty value of the immovable property being its stock in trade. Thus, the assessees i.e. both vendor and vendee stand protected since the agreement is proved genuine and payment was through banking channel. However, the tax deduction at source under section 194-IA does not provide for such concession and therefore it has to be deducted on the stamp duty value and not on the actual sale consideration.

Quiz for the week (31 Mar 2025):

Diwaker acquired an apartment for Rs. 160 lakhs from XY Builders P Ltd and the document was executed and registered in December, 2024 and the stamp duty value at the time of registration of the document was Rs.200 lakhs. Both the parties had agreed for the said transaction in April, 2023 when the stamp duty value of the property was Rs. 170 lakhs. Advance payment of Rs.25 lakhs through online banking was made in April,2023. Though an agreement was entered in to in writing, it was not registered. Discuss the implication of the transaction in the hands of both the parties.

Best Answer :

In this case, Diwakar is acquiring a property (apartment) for Rs.160 lakhs and whereas the stamp duty value was Rs.200 lakhs at the time of registration of document.

Section 194-IA deals with deduction of tax at source in respect of payment on transfer of immovable property other than agricultural land. When a transferee is responsible for paying to a resident transferor any sum by way of consideration for the transfer of immovable property being land (other than agricultural land) or building or both, tax is deductible at source if the consideration is Rs.50 lakhs or more. The quantum of tax deduction at source is the actual consideration or the stamp duty value whichever is higher. There is no safe harbour as regards the difference between the sale consideration and stamp duty value. Since it is stated that the stamp duty value is Rs.200 lakhs the tax deduction at source will be on the said amount and not the actual consideration. Therefore, the amount of tax deductible at source would be Rs.2,00,000.

In this case, there is an agreement between the parties but it was not registered. However, the payment was made in pursuance of the agreement and made through banking channel. There is an agreement or letter of allotment given by the vendor after receipt of the token advance.

In Tamojit Das v. ITO (ITA No.1200/Kol./2024 dated 3rd October, 2024) a similar issue came up before the tribunal. The assessee admitted the actual sale consideration being Rs.24.06 lakhs as against the stamp duty value of Rs.38.75 lakhs. The assessee claimed that he had paid advance amount through banking channel and furnished copy of receipt issued by the vendor, the letter of allotment and copy of the floor plan to be allotted to the assessee. The tribunal held that the copy of the allotment letter and the payments made through banking channel show that the allotment letter is to be equated to an agreement of sale. The agreement is not required to be a registered document. The only requirement in law is that there should be an agreement and the payment should follow the same and through banking channel.

Since the assessee could prove the genuineness of the agreement and the payments made through banking channel, the conditions of proviso, further proviso and third proviso to section 56(2)(x) stand satisfied. Therefore, the difference between the actual sale consideration and stamp duty value on the date of agreement is also less than 10%. Hence no amount is liable to be taxed in the hands of the buyer i.e. Diwaker.

Similarly, as regards the vendor section 43CA would be applicable. Sub-section (3) mandates an agreement and sub-section (4) mandates payment of consideration through banking channel. Both these conditions are satisfied and therefore the vendor XY Builders (P) Ltd is also not hit by section 43CA. The actual sale consideration would be considered for the purpose of section 43CA and not the stamp duty value of the immovable property being its stock in trade.

Thus, the assessees i.e. both vendor and vendee stand protected since the agreement is proved genuine and payment was through banking channel. However, the tax deduction at source under section 194-IA does not provide for such concession and therefore it has to be deducted on the stamp duty value and not on the actual sale consideration.