s.43CA — Stock in trade sold below the stamp duty value

Currently operative

The higher tolerance of one hundred and twenty per cent for a first time allotment of a residential unit was confined to transfers between 12 November 2020 and 30 June 2021 and has expired. The counterpart in the Income-tax Act, 2025 is section 53, whose sub-section (2) gives a flat one hundred and ten per cent tolerance with no residential unit carve-out, no one hundred and twenty per cent limb and no two crore rupee ceiling anywhere in the section.

Income-tax Act, 1961

s.43CA

Income-tax Act, 2025

s.53

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

Section 43CA of the Income-tax Act, 1961 provides that where the consideration received or accruing on the transfer of an asset other than a capital asset, being land or building or both, is less than the value adopted, assessed or assessable by a State Government authority for the purpose of stamp duty, that value is deemed to be the full value of the consideration for computing the profits and gains from the transfer. The first proviso disapplies the sub-section where the stamp duty value does not exceed one hundred and ten per cent of the consideration. The second proviso substituted one hundred and twenty per cent for a transfer of a residential unit taking place between 12 November 2020 and 30 June 2021, by way of first time allotment to any person, where the consideration did not exceed two crore rupees; that relief has expired. Sub-section (2) applies sub-sections (2) and (3) of section 50C, which bring in the reference to a Valuation Officer. Sub-sections (3) and (4) allow the stamp duty value on the date of the agreement to be taken where the agreement date and the registration date differ, but only where the consideration or a part of it was received by account payee cheque, account payee bank draft, electronic clearing system or a prescribed electronic mode on or before the date of the agreement. The Explanation defines a residential unit in the same words as section 80-IBA(6)(e). The counterpart in the Income-tax Act, 2025 is section 53.

What the provision does

Substitutes the stamp duty value for the price where land or a building held as stock in trade is sold below it, with a ten per cent tolerance, an agreement date rule conditional on payment through the banking channel, and a reference to a Valuation Officer where the assessee says the stamp duty value exceeds fair market value.

Threshold questions

Is the asset held as stock in trade and not as a capital asset, because a capital asset falls under section 50C instead
Does the stamp duty value exceed one hundred and ten per cent of the consideration, which is the only trigger after the first proviso
Is the agreement date rule available, which requires consideration or part of it to have been received through the banking channel on or before the date of the agreement
Has a reference to the Valuation Officer been sought under section 50C(2) as applied by sub-section (2), and if refused, is the refusal on the record
For a transfer between 12 November 2020 and 30 June 2021, was it a first time allotment of a residential unit for not more than two crore rupees, which attracted the twenty per cent tolerance

The recurring disputes.

Whether a section 43CA addition is covered by a section 80-IBA deduction

The addition is a notional increase in the full value of consideration for computing the profits and gains from the transfer of an asset that is stock in trade of the eligible business. The assessee's argument is that it is therefore computed inside the profits and gains of that business and falls within the words of section 80-IBA(1), profits and gains derived from such business, so the deduction covers it; and that any other reading taxes a developer on a profit it did not make while denying it the relief Parliament gave on the profit it did. The Revenue's argument is that derived from has been read restrictively in this area, as in Moon Star Developers, and that a fiction substituting a value the developer never received cannot produce income derived from the business of developing and building. No authority either way could be located. If the Revenue is right, the addition is taxable in a year in which the real profit is fully deducted, and for a company it increases regular tax while leaving book profit untouched.

The agreement date rule and the banking channel condition

Sub-section (3) allows the stamp duty value on the date of the agreement to be taken, which in a rising market is the difference between an addition and none, and sub-section (4) makes it conditional on the consideration or part of it having been received by a specified banking mode on or before that date. A booking taken in cash, or against a cheque banked after the agreement date, loses the agreement date and is tested against the circle rate at registration. The condition is strict on its words and the recurring argument is whether a part payment of any size suffices, the sub-section saying a part thereof without a minimum. The answer on the words is that any part does, and the practical answer is to take a meaningful part and keep the bank evidence with the agreement.

The same circle rate firing twice on an affordable unit

For a project approved on or after 1 September 2019, clause (g) of the substituted set in section 80-IBA(2) caps the stamp duty value of a unit at forty-five lakh rupees. A unit sold for forty-one lakh rupees where the stamp duty value is forty-seven lakh rupees breaches that condition and suffers a section 43CA addition of six lakh rupees, on the same circle rate, with no relief in either provision for the fact that the price charged was inside the affordable band. Neither provision contains a hardship test and neither has been litigated on this interaction.

The reference to the Valuation Officer, and what it is worth

Sub-section (2) applies sub-sections (2) and (3) of section 50C, so where the assessee claims that the stamp duty value exceeds the fair market value and that value has not been disputed in any appeal, revision or reference, the Assessing Officer may refer the valuation to a Valuation Officer, and by section 50C(3) the stamp duty value is taken where the ascertained value exceeds it. The word is may, which the Revenue reads as a discretion and the assessee as a duty once the conditions in clause (a) and clause (b) are met. The practical point is that an addition made without the reference, where it was asked for, is vulnerable: the Ahmedabad Bench applied the same discipline to a measurement question under section 80-IBA in Kavish Infrastructure. Ask for the reference in writing and record the answer or the silence.

Frequently asked.

What is the tolerance, and is there still a higher one for residential units?

Ten per cent: the first proviso disapplies the section where the stamp duty value does not exceed one hundred and ten per cent of the consideration. The higher tolerance of one hundred and twenty per cent applied only to a transfer of a residential unit between 12 November 2020 and 30 June 2021, by way of first time allotment, where the consideration did not exceed two crore rupees, and it has expired. Section 53 of the Income-tax Act, 2025 gives a flat one hundred and ten per cent with no residential carve-out of any kind.

Can the stamp duty value on the date of the agreement be used?

Yes, under sub-section (3), where the date of the agreement fixing the consideration and the date of registration are not the same. But sub-section (4) makes it conditional: the consideration or a part of it must have been received by account payee cheque, account payee bank draft, electronic clearing system or a prescribed electronic mode on or before the date of the agreement. A cash booking loses the agreement date. Section 53(3) and (4) of the 2025 Act carry the same rule, with the banking condition compressed to a specified banking or online mode.

How does section 43CA differ from section 50C and section 56(2)(x)?

Section 43CA applies to an asset other than a capital asset, that is to stock in trade, and the addition is to business profits. Section 50C applies to a capital asset and the addition is to capital gains; its tolerance is also one hundred and ten per cent, in the third proviso to sub-section (1), but it has no residential unit relief and no two crore ceiling. Section 56(2)(x) taxes the buyer on the excess where immovable property is received for inadequate consideration, with a tolerance of the higher of fifty thousand rupees and ten per cent of the consideration, and its fourth proviso carried the mirror of the expired section 43CA relief. In the 2025 Act the three are sections 53, 78 and the income from other sources provisions respectively.