Nagpur News: In every finance bill, few provisions are either inserted or amended, which mostly creates new debate and many times lead to fresh litigation. Similar position has been observed in the Finance Act, 2013, wherein insertion of new Section 43CA and amendment in Section 53(2)(vii) as generated a situation which clearly leads to ‘Multiple Taxation’ shattering fundamental principles of taxation policy.
In the event of any sale purchase of flat or land, either new or old, if the consideration is less than Market (ready reckoner) value than both seller and buyer would be taxed on the difference amount. For example, X (an individual) purchases a flat from Y at Rs.100 lakhs and ready reckoner value of the said flat is Rs.125 lakhs on which stamp duty is paid, then as per these amendments, Y will be taxed on Rs.125 lakhs as business income and Y would be taxed as Rs.25 lakhs as income from other sources. Therefore, there is ‘Double Taxation’ at the point of sale (as in said example, wherein both seller as well as purchaser is taxed for additional Rs.25 lakhs each).
Taking this multiple taxation policy on priority, delegation of Vidarbha Taxpayers Association (VTA) led by its President J. P. Sharma met Chief Commissioner of Income Tax A. K. Shrivastava and discussed the issue in length and also handed over memorandum on the subject.
VTA also sent detailed memorandum along with illustrations to Dr. Man Mohan Singh – Prime Minister, P. Chidambaram – Union Finance Minister and Sudha Sharma – Chairperson, Central Board of Direct Taxes (CBDT), New Delhi demanding withdrawal of such provisions with retrospective effect.
J. P. Sharma said that traders and industrialists including common man are seriously hit by the continued devaluation of the rupee, which has hit economy extremely bad and in such situation this multiple taxation policy by the Finance Ministry is totally unjustified and needs to be withdrawn immediately.
Tejinder Singh Renu, secretary of VTA said that these provisions not only amounts to ‘Double Taxation’ but also amounts to ‘Multiple Taxation’ at every subsequent point of sale, especially, if the sales consideration is lower than the stamp duty value in any subsequent transaction, thereby leading to ‘Cascading Effect’ of taxation. Similarly off late, Section 50C has been witnessing serious controversies and is fraught with many unanswered issues. While this puzzle is getting complex, introduction of Section 43CA has added ‘FUEL TO THE FIRE’. Though the provisions read simple, there are serious and complex issues arise while implementing these provisions.
Hemant Trivedi, Joint Secretary of VTA specifically raised the issue that the proposed provisions creating charge on deemed/notional basis have shattered the fundamental principles of taxation of business income and this is leading to multiple taxation, which shall also create complexities and also increase additional tax burden on the taxpayers.
Ready Reckoner rates cannot be perfect, price varies as per new and old building and similarly location advantage also makes major impact on actual pricing of the property. Likewise majority of residential properties are purchased with the help of bank loans, thus bank will also finance such deemed tax liable on purchaser ?
VTA appealed to the Government and CBDT that admittedly such double taxation violates constitutional rights of the taxpayers’, hence such sections and provisions should be withdrawn with retrospective effect in the interest of natural justice.
On hearing the issue, Chief Commissioner Shrivastava said that he’ll go through the issue, although agreed that it looks like double taxation at a glance on same transaction, he specifically agreed that he’ll forward the memorandum to CBDT with appropriate remarks.