ITAT allows Stamp Duty paid on Sale by Builder, holds Section 43CA of Income Tax Act not to be Triggered [Read Order]

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT), allowed the stamp duty paid on sale by the builder and held that Section 43CA of the Income Tax Act, 1961 not to be triggered.

During the course of the assessment proceedings, it was observed by the Assessing Officer that the assessee company, M/s. Mahavir Infracon PvtLtd, had debited in its profit and loss account under the head “sale registration charges”. On being queried about the nature of the aforesaid expenses, it was stated by the assessee that the same were the expenses which were incurred towards stamp duty and registration fees in some instances of sale in order to promote its sales.

The Assessing Officer was of the view that as it was an obligation of the purchaser to pay stamp duty and registration fees in order to strengthen his title as regards the property purchased, therefore, the claim for deduction of the same as an expenditure by the assessee was totally unjustifiable as there was no obligation cast upon it to have incurred the same.

Rebutting the observations of the Assessing Officer that the stamp duty and registration fees were compulsorily to be paid by the purchaser, it was observed by the CIT(Appeals) that as per Section 29 of the Indian Stamp Act, 1899, it was only in the absence of any agreement to the contrary that the expenses in relation to stamp duty payable on transfer of asset was to be borne by the buyer.

The Tribunal of Ravish Sood, Judicial Member and Dipak P Ripote, Accountant Member observed that “For the reason that as the assessee had sold the properties/units at the market value determined by the Stamp Valuation Authority and had received the sale consideration as mentioned in the registered sale deed, therefore, the provisions of Section 43CA of the Income Tax Act by no means could have been invoked in its case.”

The Bench concluded by noting that the Assessing Officer had failed to point out a single instance wherein the sale consideration received on the sale of the properties/units by the assessee was lower than the value adopted or assessed or assessable by any authority of the state government for the purpose of payment of stamp duty in respect of transfer of the same, therefore, there was no justification for him to have triggered the provisions of Section 43CA of the Income Tax Act.

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