Deeming provision interaction: section 44AD and 43CA cannot produce double additions when turnover records stamp duty value.

Where a taxpayer's business income is computed under the presumptive scheme of section 44AD and assessed turnover already reflects stamp duty value, section 43CA cannot be used to make a separate addition of the stamp duty differential. The correct approach harmonises the two deeming provisions: section 43CA only informs the turnover to which the 44AD presumptive rate applies; making an additional 43CA-based adjustment alongside an accepted 44AD computation results in impermissible double counting and is not sustainable, so the additional tax demand is deleted.

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Issues: Whether, where business income is declared and accepted under section 44AD of the Income-tax Act, 1961 and turnover is recorded at the stamp duty value, a separate addition of the differential amount can be made under section 43CA of the Income-tax Act, 1961.

Analysis: Section 44AD operates as a complete deeming code for computing business profits on the basis of turnover or gross receipts by prescribing a percentage of turnover as taxable income. Section 43CA is also a deeming provision which substitutes stamp duty value for the stated consideration for the limited purpose of computing business income from transfer of land or building held as stock-in-trade. When both deeming provisions are in play, they must be harmonised to give effect to each without producing duplication. If section 44AD applies and the turnover/gross receipts base already reflects the stamp duty value (as recorded in the assessment), section 43CA's effect is limited to determining the appropriate turnover for application of the presumptive rate under section 44AD. Making a separate addition of the stamp duty differential, in addition to applying the presumptive percentage on the adopted turnover, results in an impermissible hybrid computation and double counting unless section 44AD is first displaced and normal computation is undertaken.

Conclusion: The separate addition of the differential amount under section 43CA is not sustainable where turnover for section 44AD has been recorded at the stamp duty value and the presumptive computation under section 44AD has been accepted; the addition is deleted and the appeal is partly allowed in favour of the assessee.

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