Calcutta HC rules that deeming provision of substituting stamp duty value in computing capital gains tax levy not to apply to cases where transfer does not require stamp duty payment

This Tax Alert summarizes a Calcutta High Court (HC) ruling, dated 24 February 2023, in the case of The Durgapur Projects Limited [1]  (Taxpayer), wherein the issue before the HC was whether the stamp duty value of the property can be adopted as “full value of consideration” for the purpose of computing capital gains arising on compulsory acquisition of non-agricultural land parcel by the government, in place of receipt of actual compensation.

In computation of capital gains, the Income Tax Act, 1961 (ITA) require adoption of stamp duty value if actual consideration received on transfer of land or building is lower than the value adopted for the purpose of levy of stamp duty under the applicable state law.

The HC held that in case of compulsory acquisition of land by the government, there can be no scope of suppression in value of consideration received by the Taxpayer. Consequently, provision of adoption of stamp duty value fictionally, which was meant to curb the menace of unaccounted cash, has no applicability. The HC further held that computation of capital gains adopting stamp duty value will have no applicability where transfer is not otherwise liable to payment of stamp duty. 

[1] Principal Commissioner of Income-tax v. The Durgapur Projects Limited [TS-81-HC-2023(CAL)]