Applicability of Section 43CA to Agreements Entered Into Prior To Introduction of the Provision

Section 43CA was introduced with effect from Assessment Year 2014-15 to tax the difference, when the stamp duty value exceeds the agreed sale consideration for land or buildings held as non-capital assets. A key controversy centres on whether it applies to transactions where the agreement for sale was executed prior to 1 April 2013, but registration occurred subsequently.

Although the Jaipur Tribunal in Spytech Buildcon initially applied Section 43CA due to the lack of advance banking payments, later rulings such as Kashyan Promoters held that the provision cannot apply to genuine prior agreements where contractual obligations and sale consideration were already fixed.

Issue for Consideration

Section 43CA of the Income Tax Act, 1961 (“the Act”) was introduced into the statute by the Finance Act, 2013 with effect from Assessment Year 2014-15. It primarily applies to transfer of land or building or both, held as an asset other than capital asset. This provision is tailored on the lines of section 50C of the Act, introduced by the Finance Act, 2002, w.e.f. Assessment Year 2003-04, which applies to land or building or both held as capital assets. Both the provisions deal with land or building or both, and primarily seek to ensure that the recorded agr