2019 (4) TMI 1877 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - difference between the stamp duty value and the actual purchase consideration - Whether the agricultural land purchased by the appellant not being a 'property' as per the definition provided in the said section, it being an agricultural land not falling in the definition of capital asset? - HELD THAT - Agricultural land purchased by assessee is not governed by the provisions of section 56(2)(vii)(b) being not capital asset and also because of the fact that the assessee was holding it as stock in trade. It is outside the purview of said section and no addition has to be made in the hands of assessee. Coming to the decision of Jaipur Bench of Tribunal in ITO v. Trilok Chand Sain 2019 (2) TMI 277 - ITAT JAIPUR wherein provisions of clause (b) of section 56(2)(vii) were considered. They have failed to take into cognizance the provisions of clause (c) of said section, which talks of property other than immovable property. Tribunal only to the definition of 'immovable property' and hold that it is not circumscribed or limited to any particular nature of property. Clause (c) very clearly talks of property other than immovable property and the word 'property' has further been defined under clause (d) of Explanation thereunder. In view of clear-cut provisions of the Act, we find no merit in the orders of authorities below in making the aforesaid addition in the hands of assessee - Appeal No. 1 raised by assessee is thus, allowed.

Summary

Issues:
Appeal against addition made under section 56(2)(vii)(b) of the Income-tax Act, 1961.

Analysis:
1. The appeal concerns the addition made under section 56(2)(vii)(b) of the Act, related to the difference between stamp duty value and actual purchase consideration of immovable property.

2. The assessee had purchased properties and explained the sources of investments, maintaining that the properties were agricultural land not falling under the definition of capital asset as per section 2(14) of the Act.

3. The Assessing Officer invoked section 56(2)(vii)(b)(ii) of the Act, adding the difference between stamp duty value and actual consideration as income from other sources.

4. The CIT(A) upheld the Assessing Officer's order, leading to the appeal before the ITAT Pune.

5. The Authorized Representative argued that the agricultural land purchased was not a capital asset and was held as a current asset, later sold as business income.

6. The ITAT Pune analyzed the provisions of section 56(2)(vii) of the Act, emphasizing that agricultural land is excluded from the definition of capital asset under section 2(14).

7. Referring to the definition of property under the Act, the ITAT Pune concluded that the agricultural land purchased by the assessee did not fall under the purview of section 56(2)(vii)(b) as it was not a capital asset and was held as stock in trade.

8. The ITAT Pune distinguished the decision of the Jaipur Bench of Tribunal in a similar case, highlighting the importance of clause (c) of section 56(2)(vii) which addresses property other than immovable property.

9. Ultimately, the ITAT Pune allowed the appeal, stating that the provisions of section 56(2)(vii)(b) were not applicable to the agricultural land purchased by the assessee, and no addition was warranted.

10. The ITAT Pune's decision emphasized the clear definitions under the Act, rejecting the reliance on the Jaipur Bench's decision and ruling in favor of the assessee, thereby allowing the appeal.