2019 (9) TMI 487 - AT - Income Tax

Income from other sources u/s 56(2)(vii)(b) - difference between the stamp value of the property purchased as on the date of registration of sale deed and the actual purchase consideration was liable to be considered as income under this section - HELD THAT - First proviso to section 56(2)(vii)(b) categorically provides that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purpose of this provision. Admittedly, the irrevocable PoA was registered in the year 2008 fixing the price of the property at ₹ 21.00 lac, even though the actual transfer took place in the year 2015. Prescription of the second proviso is admittedly fulfilled in the instant case in as much as the assessee paid a sum of ₹ 1.00 lakh as part payment prior to the date of the Agreement in the year 2008 through banking channel. Mandate of the main part of section 56(2)(vii)(b) does not apply to the facts of the instant case as it is covered by the first and second provisos in as much as the assessee entered into an agreement fixing the amount of consideration for the purchase of immovable property in the year 2008 but the actual registration took place in 2015 and further the assessee paid a part of the consideration by cheque in the year 2008 before the date of the Agreement. It is the stamp value on the date of Agreement in the year 2008, which should be applied for the purpose of the sub-clause and not the stamp value as in the year 2015. Stamp value of the property as on the date of agreement in 2008 was ₹ 23,75,000/- as has been recorded in para no.4.2 of the assessment order. As such stamp value is obviously less than the actual consideration at ₹ 31.00 lakh, I hold that the mandate of the main part of section 56(2)(vii)(b) is not attracted so as to warrant any addition on this score

Summary

Issues:
Interpretation of section 56(2)(vii)(b) - Applicability of provisions to a property transaction involving a purchase deed executed in 2015 but with an agreement made in 2008.

Analysis:

Issue 1: Interpretation of section 56(2)(vii)(b)
The case involved a property transaction where the assessee purchased a plot of land with TDR/FSI rights, leading to a dispute over the application of section 56(2)(vii)(b) of the Income Tax Act. The Assessing Officer (AO) invoked this provision to add the difference between the stamp value and the actual purchase consideration as income. The contention was whether this provision, inserted by the Finance Act, 2013, could be applied retroactively to a transaction where the agreement was made in 2008 but the sale deed was executed in 2015. The Tribunal held that since the sale deed was executed in 2015 when the provision was in force, it was applicable to the transaction.

Issue 2: Application of Provisos to section 56(2)(vii)(b)
The assessee argued that if the provision was to be applied, it should consider the two provisos attached to it. The first proviso allowed the stamp duty value on the date of the agreement to be considered if the agreement and registration dates differed. The second proviso required that consideration, or part thereof, be received through banking channels at the time of agreement. The Tribunal accepted this argument, noting that the agreement fixing the consideration was made in 2008, and a part payment was made through banking channels. Therefore, the stamp value on the date of the agreement in 2008 should be applied, not the stamp value in 2015. As the stamp value in 2008 was lower than the actual consideration, the main part of section 56(2)(vii)(b) did not apply, leading to the deletion of the addition made by the AO.

In conclusion, the Tribunal allowed the appeal, holding that the provisions of section 56(2)(vii)(b) were applicable to the transaction, but the application should consider the provisos attached to the section. The stamp value on the date of the agreement in 2008 was to be used, resulting in the deletion of the addition made by the AO.