Example
Mr Santosh acquired a house property on 16/07/2020 for Rs: 40,00,000. He entered into an agreement to sell on 14/02/2021 with Mr. Naveen for Rs: 70,00,000 and Stamp Duty Value on that date is Rs: 80,00,000. Naveen paid Rs: 7,00,000 by cheque on 14/02/2021 and the cheque was cleared on 18/02/2021. The possession is given to Mr. Naveen on 10/12/2021 when Naveen paid balance amount of Rs: 63,00,000 and property registered in the name of Mr. Naveen on 10/12/2021, Stamp Duty Value on the date of registration is Rs: 1,10,00,000 . Discuss tax treatment in hands of Santosh and Naveen if property is held as capital asset or Stock in trade.
Solution:
Situation-1 Property held as capital asset (In both Hands)
In hands of Mr. Santosh Computation of capital Gain for the assessment year 2022-23
| Particulars | Amount |
| Full Value of Consideration [As per Section 50C] | 80,00,000 |
| Less: Transfer Expenses | – |
| Net Consideration | 80,00,000 |
| Less: Cost Of Acquisition | 40,00,000 |
| Short Term Capital Gain | 40,00,000 |
In hands of Mr. Naveen for the assessment year 2022-23
Section 56(2)(x) because difference between Stamp Duty Value and consideration is more than Rs:50,000 and Stamp Duty Value is more than 105% of consideration [(Rs 80,00,000 -Rs 70,00,000)= Rs: 10,00,000]. So taxable under Income From Other Sources in hands of Naveen for assessment year 2022-23.
Part B: Property held as stock in trade ( In both hands)
In hands of Mr. Santosh : Profit and Gain from business
| Particulars | Amount |
| Sale Price of Stock [43CA] | 80,00,000 |
| Less: Cost of Stock | 40,00,000 |
| Profit or Gain from Business or profession | 40,00,000 |
In hands of Mr. Naveen
As per CBDT circular if asset received by any person as stock in trade then section 56(2)(x) is not applicable.
