In cases where the stamp duty and registration cost is borne by the vendor, the consideration received by the vendor would be reduced. In such cases, the value as per the stamp valuation authorities has to be adopted for the purpose of computing the capital gain under the provisions of the Income Tax Act, the ITAT Vishakhapatnam bench ruled on Friday.
Assessee, an advocate by profession, sold his two properties. While filing returns for the relevant year, the Assessee claimed that that the stamp duty and the registration charges was incurred by himself and therefore, the amount so paid must be deducted from his capital gain income. The assessing officer disallowed the above expenses holding that the expenses required to be borne by the buyer but not by the assessee.
On appeal, the first appellate authority confirmed the above order.
The bench noted that as per the provisions of section 45 of the Income Tax Act, the expenses incurred for transfer of the property is allowable as deduction. Stamp duty and registration charges forms part of the cost of acquisition of the property, which is required to be borne by the buyer.
“As per the provisions of section 48 of the Income Tax Act, the expenditure incurred wholly and exclusively in connection with the transfer of property is allowed as deduction. Since the stamp duty and registration cost is not considered as expenses in relation to transfer in the hands of the transferor, the same is not allowable.”
The bench further, upheld the view taken by the first appellate authority that the arrangement of incurring stamp duty and registration charges by the vendor effectively reduces the value of the consideration received by the vendor and also violates the mandate specified in the section 50C of the Act.
“In such case, while determining capital gains, the value as per the stamp valuation authorities has to be adopted for the purpose of computing the capital gains. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld.”
Read the full text of the Order below.