Ajay, a property dealer, entered into an agreement with Mukesh to sell a plot on 6th April, 2022 for ₹55 lakh. He received an advance of ₹12 lakh from him on the date of agreement by account payee cheque. Transfer took p

Tax consequences in the hands of Mr. Ajay As per section 50C of the Income tax Act, 1961, where the actual sale consideration is less than the value adopted by the Stamp Valuation Authority for the purpose of charging stamp duty, and such stamp duty value exceeds 110% of the actual sale consideration, then, the value adopted by the Stamp Valuation Authority shall be taken to be the full value of consideration. In a case where the date of agreement is different from the date of registration, stamp duty value on the date of agreement can be considered provided the whole or part of the consideration is received by way of account payee cheque/bank draft or by way of ECS through bank account or through such other electronic mode as may be prescribed, on or before the date of agreement. In this case, since ₹12 lakhs is received through account payee cheque on the date of agreement, stamp duty value on the date of agreement would be considered for determining the full value of consideration. Accordingly, in this case, business income would be computed in the hands of Ajay, for A.Y.2023-24, taking the actual consideration of ₹55 lakh of plot as the full value of consideration arising on transfer of such plot, since the stamp duty value on the date of agreement does not exceed 110% of the actual consideration. [Section 43CA] Tax consequences in the hands of Mr. Mukesh In case, immovable property is received for inadequate consideration, the difference between the stamp duty value and actual consideration would be taxable under the head income from other sources under section 56(2)(x) in the hands of the recipient, if such difference exceeds the higher of ₹50,000 or 10% of actual sales consideration. In a case where the date of agreement is different from the date of registration, stamp duty value on the date of agreement can be considered provided the whole or part of the consideration is paid by way of account payee cheque/bank draft or by way of ECS through bank account or through such other electronic mode as may be prescribed, on or before the date of agreement. In this case, since ₹12 lakhs is paid through account payee cheque on the date of agreement, stamp duty value on the date of agreement would be considered. Therefore, nothing would be taxable in the hands of Mr. Mukesh under the head "Income from Other Sources" in A.Y.2023-24 since the difference between stamp duty value on the date of agreement and actual consideration does not exceed ₹5,50,000 being the higher of ₹50,000 and 10% of consideration. At the time of subsequent sale of property by Mukesh to Deepti, short-term capital gains would arise in the hands of Mukesh in A.Y.2023-24, since the property is held by him for less than 24 months. Computation of Short-term Capital Gain Full value of consideration: ₹65 lakh (Since actual consideration of ₹65 lakh is higher than stamp duty value of ₹64 lakh) Less: Cost of acquisition: ₹55 lakh Short-term capital gains: ₹10 lakh