Stamp duty and registration charges deductible when borne under sale deed; section 43CA cannot apply at stamp value.

Stamp duty and registration charges borne by a real estate seller under the sale deed were treated as business expenditure incurred wholly and exclusively for the purposes of the business and therefore allowable as a deduction. Section 43CA was held inapplicable where the properties were sold at the stamp valuation and the full consideration stated in the sale deeds was received, so no sustainable addition arose on an alleged shortfall. The buyer was not presumed liable for stamp duty in the face of a contrary agreement, since section 29 of the Indian Stamp Act makes buyer liability subject to contractual allocation. The variation was also within the 10% tolerance band.

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Issues: Whether the assessee was entitled to deduction of stamp duty and registration charges incurred in the course of its real estate business, and whether section 43CA of the Income-tax Act, 1961 could be invoked to make an addition on the footing that such expenditure reduced the sale consideration below stamp valuation.

Analysis: The assessee had borne the stamp duty and registration expenses in terms of the registered sale deeds, and the liability was reflected in the documentary evidence on record. Such expenditure was held to be incurred wholly and exclusively for the purposes of business and therefore allowable as a business deduction. Section 43CA was found inapplicable because the properties and units were sold at the value adopted by the Stamp Valuation Authority and the full sale consideration mentioned in the sale deeds had been received. The view that the purchaser was compulsorily liable to bear the stamp duty was rejected with reference to section 29 of the Indian Stamp Act, 1899, which makes the buyer liable only in the absence of an agreement to the contrary. It was also noted that the variation between the stated consideration and stamp value was within the 10% tolerance band.

Conclusion: The addition under section 43CA was not sustainable and the deduction of stamp duty and registration charges was allowable.

Final Conclusion: The Revenue's challenge failed, and the deletion of the addition was upheld.

Ratio Decidendi: Where a seller in the real estate business bears stamp duty and registration expenses under the sale deed and the consideration received is at stamp value, such expenditure is a deductible business outlay and section 43CA cannot be invoked absent a demonstrated shortfall below the statutory threshold.

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