2023 (4) TMI 470 - AT - Income Tax

Addition u/s 43CA - Claim for deduction of the stamp duty and registration charges by the assessee company - whether allowable as a deduction within the meaning of Section 37(1)? - CIT-A deleted the addition - HELD THAT - We are of a strong conviction that the A.O had grossly erred in law and facts of the case in declining the assessee s claim for deduction of stamp duty and registration expenses, which being in the nature of an expenditure having been incurred wholly and exclusively for the purpose of its business were clearly allowable as a deduction within the meaning of Section 37(1). We concur with the view taken by the CIT(Appeals) that the A.O misconceiving the scope and gamut of the provisions of Section 43CA had wrongly applied the same to the case of the present assessee before us 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 Act by no means could have been invoked in its case. Also, as the A.O 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 Act. Alternatively, we are also in agreement with the CIT(Appeals) that even otherwise, now when the valuation towards actual sale consideration and the value adopted for stamp duty in the present case varies between 5% to 7%, i.e., within the tolerance limit of upto 10%, therefore, pursuant to the amendment made available on the statute vide Finance Act, 2019 that is applicable w.e.f. A.Y.2014- 15, no adverse inferences could have been drawn u/s.43CA - We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the CIT(Appeals) uphold his order. Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (A.O) under Section 43CA of the Income Tax Act, 1961.

Summary of Judgment:

Issue 1: Deletion of Addition under Section 43CA
The revenue challenged the order of the CIT(Appeals) which deleted an addition of Rs.2,24,25,380/- made by the A.O under Section 43CA of the Income Tax Act, 1961. The A.O had added this amount to the assessee's income, arguing that the assessee, engaged in real estate, had unjustifiably claimed deduction for stamp duty and registration fees. The A.O contended that these expenses should be borne by the purchaser and that incurring these costs by the seller would reduce the sale consideration below the value determined by the Stamp Valuation Authority, thus triggering Section 43CA.

Findings by CIT(Appeals):
The CIT(Appeals) verified the assessee's claim and found that the stamp duty and registration charges were indeed incurred by the assessee and mentioned in the registered sale deeds. The CIT(Appeals) observed that the properties were sold at market value determined by the Stamp Valuation Authority, and full sale consideration was received, making Section 43CA inapplicable. The CIT(Appeals) also noted that Section 29 of the Indian Stamp Act, 1899, allows for an agreement where the seller bears the stamp duty. Additionally, an amendment by the Finance Act, 2019, allows for a variation of up to 10% between actual consideration and the stamp duty value, which was applicable from A.Y. 2014-15. In this case, the variation was within 5% to 7%, thus no addition was warranted.

Tribunal's Decision:
The Tribunal upheld the CIT(Appeals) order, agreeing that the expenses were incurred wholly and exclusively for business purposes and were allowable under Section 37(1) of the Act. The Tribunal found no merit in the A.O's application of Section 43CA, as the properties were sold at market value and full consideration was received. The Tribunal also supported the CIT(Appeals)'s reliance on the amendment allowing a 10% variation in valuation.

Conclusion:
The appeal filed by the revenue was dismissed, affirming that the addition made by the A.O under Section 43CA was unjustified and the expenses claimed by the assessee were allowable deductions. The Tribunal found no infirmity in the CIT(Appeals)'s order and upheld it.