Special provision for full value of consideration in certain cases.
78(1)
If the consideration received or accruing from the transfer of a capital asset, being land or building or both, is less than the stamp duty value, then, for the purposes of section 72, the stamp duty value shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, subject to the following:––
- (a) the stamp duty value on the date of agreement may be taken as the full value of consideration, if–– (i) the date of the agreement fixing the consideration and the date of registration for the transfer of the capital asset are not the same; and (ii) part or full consideration is received on or before the date of the agreement by an account payee cheque or account payee bank draft or electronic clearing system through a bank account or any other electronic mode, as prescribed;
- (b) if the stamp duty value does not exceed 110% of the consideration received or accruing, such consideration shall be deemed to be the full value of the consideration for section 72.
78(2)
Without prejudice to the provisions of sub-section (1), the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and the provisions of sections 269(3) to (8), shall, with necessary modifications, apply in relation to such reference, where––
- (a) the assessee claims that the stamp duty value exceeds the fair market value of the property as on the date of transfer; and
- (b) the stamp duty value has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court
78(3)
In this section, “assessable” means the value which any authority of the Government would have adopted or assessed as if it were referred to such authority for the purposes of payment of stamp duty, regardless of anything to the contrary contained in any other law in force.
78(4)
If the value determined by the Valuation Officer on a reference made under sub-section (2) exceeds the stamp duty value, such stamp duty value shall be taken as the full value of consideration.
Section Summary:
This section addresses situations where the consideration received from the transfer of a capital asset (land or building) is less than the stamp duty value. It ensures that the stamp duty value is deemed as the full value of consideration for tax purposes, with specific exceptions and provisions for valuation disputes.
Key Changes:
- Stamp Duty Value as Deemed Consideration: If the actual sale consideration is less than the stamp duty value, the stamp duty value is treated as the full value of consideration for tax purposes, unless specific conditions are met.
- Exception for Agreement Date: If the agreement date and registration date differ, and part or full payment is made via prescribed modes (e.g., account payee cheque, electronic transfer), the stamp duty value on the agreement date can be considered.
- 10% Margin: If the stamp duty value does not exceed 110% of the actual consideration, the actual consideration is deemed as the full value.
- Valuation Officer Reference: The Assessing Officer can refer the property valuation to a Valuation Officer if the assessee disputes the stamp duty value, provided no prior disputes or appeals exist.
- Assessable Value Definition: Clarifies that "assessable" refers to the value adopted by the government for stamp duty purposes, overriding other laws.
Practical Implications:
- For Sellers: Sellers of land or buildings must ensure that the sale consideration aligns with the stamp duty value to avoid higher tax liabilities. If the consideration is lower, the stamp duty value may be used for tax calculations.
- For Buyers: Buyers must ensure proper documentation and payment modes (e.g., account payee cheques, electronic transfers) to avoid disputes or higher tax implications.
- Valuation Disputes: If the stamp duty value is contested, the Assessing Officer can refer the matter to a Valuation Officer, potentially delaying the tax assessment process.
- Compliance Burden: Taxpayers must maintain detailed records of agreements, payments, and registration dates to substantiate their claims.
Critical Concepts:
- Stamp Duty Value: The value of the property as assessed by the government for stamp duty purposes.
- Fair Market Value (FMV): The price the property would fetch in an open market. If the stamp duty value exceeds FMV, the taxpayer can dispute it.
- Account Payee Cheque/Bank Draft: Payments made through these modes ensure traceability and compliance with tax laws.
- Valuation Officer: An officer appointed under the Income Tax Act to determine the fair market value of assets.
Compliance Steps:
- Document Agreement and Payment Dates: Ensure the agreement date and payment details are clearly documented.
- Use Prescribed Payment Modes: Make payments via account payee cheques, bank drafts, or electronic transfers.
- Maintain Records: Keep records of the stamp duty value, sale agreement, and payment receipts.
- Dispute Resolution: If disputing the stamp duty value, provide evidence of the fair market value and avoid prior appeals or references to other authorities.
Examples:
- Scenario 1: A property is sold for ₹90 lakh, but the stamp duty value is ₹1 crore. Since the stamp duty value exceeds 110% of the consideration (₹99 lakh), the actual consideration (₹90 lakh) is deemed as the full value for tax purposes.
- Scenario 2: A property is sold for ₹80 lakh, and the stamp duty value is ₹1 crore. The agreement date and registration date differ, and ₹50 lakh is paid via electronic transfer on the agreement date. The stamp duty value on the agreement date (₹90 lakh) is deemed as the full value of consideration.
- Scenario 3: A taxpayer disputes the stamp duty value, claiming the fair market value is lower. The Assessing Officer refers the matter to a Valuation Officer, who determines the value at ₹95 lakh. Since this exceeds the stamp duty value (₹1 crore), the stamp duty value remains the full value of consideration.