2021 (9) TMI 701 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - difference in value in respect of the subject properties - declared sale consideration shown by the assessee is lesser than the stamp duty value (market value) determined by the stamp duty authority - scope of exception to section 56(2)(vii)(b)(ii) - Difference between section 50C or section 56(2)(vii)(b)(ii) - HELD THAT - As the amendments to sections 50C, 56(2)(x) and 43CA providing for exception in case of marginal difference between the declared sale consideration and value determined by the stamp valuation authority were introduced to the statute by Finance Act, 2018 with effect from 01-04-2019. Meaning thereby, the legislature did not felt the necessity of introducing such an exception to section 56(2)(vii)(b)(ii) simply for the reason that such provision was applicable for a period between 1st October, 2009 to 1st April, 2017 - non-introduction of similar exception to section 56(2)(vii(b)(ii) cannot be held against the assessee. Rather, section 56(2)(vii)(b)(ii) has to be harmoniously construed along with sections 50C, 56(2)(x) and 43CA and the exceptions provided in the later three provisions have to be read into section 56(2)(vii)(b)(ii) to provide true meaning to the intention of the legislature. This, according to us, clearly answers submissions of learned departmental representative regarding absence of a provision identical to third proviso to section 50C(1) in section 56(2)(vii)(b)(ii). In our considered opinion, the assessee would be eligible to get the benefit of ten per cent margin difference in the valuation between the value determined by the stamp duty authority and the declared sale consideration. Thus, if the variation between the aforesaid two values falls within the range of ten per cent, no addition can be made. A benefit given to a seller of the property in respect of marginal variation cannot be denied to the buyer of the property, since, they stand on the same footing. This aspect of the issue has also been considered by the co-ordinate bench in case of Shri Sandip Patil vs ITO (supra), wherein, the co-ordinate bench has held that there cannot be two different fair market value in respect of the very same property, i.e. one at the hands of the seller and the other at the hands of the buyer. Thus, in our view, if the difference in valuation between the value determined by the stamp duty authority and the declared sale consideration is less than 10%, no addition can be made under section 56(2)(vii)(b)(ii). Whether the exception to section 50C(1) by way of third proviso and section 56(2)(x)(b)(B) would apply prospectively or retrospectively? - The issue is no more res integra in view of a number of decisions of different benches of the Tribunal. The Tribunal has consistently expressed the view that since the aforesaid amendments made by Finance Act, 2018 with effect from 01-04-2019 are curative in nature and beneficial provisions, it would apply retrospectively. See SRI SANDEEP PATIL 2020 (10) TMI 923 - ITAT BANGALORE and MARIA FERNANDES CHERYL 2021 (1) TMI 620 - ITAT MUMBAI - We delete the addition - Decided in favour of assessee. Disallowance being deduction claimed towards cost of acquisition/improvement - HELD THAT - As we find that the other charges comprise of maintenance charges, water charges, electricity connection charges, etc. In our view, these payments cannot form part of either the cost of acquisition or cost for improvement. Similarly, details of interest expenditure have not been furnished by the assessee. Further, the assessee has failed to prove that such expenditure was incurred wholly and exclusively for the purpose of transfer of the capital asset. That being the case, we are unable to accept assessee s claim of deduction. The decision relied upon by the learned authorized representative being based on its own facts, is not applicable to the present case.

Issues Involved:
1. Addition of ?23,30,694/- under section 56(2)(vii)(b) of the Income Tax Act, 1961.
2. Disallowance of ?1,50,000/- and ?1,73,308/- being development charges and bank interest respectively while calculating long-term capital gain.
3. Charging of interest under sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of ?23,30,694/- under section 56(2)(vii)(b):

The assessee, engaged in trading imitation jewelry, filed a return of income declaring total income and a current year loss. During the assessment, the officer noticed that the declared sale consideration for four immovable properties was lesser than the stamp duty value, resulting in a difference of ?23,30,694/-. The officer invoked section 56(2)(vii)(b)(ii) to add this amount to the income.

The assessee argued that the difference was due to a slight delay in registration and that the market value should be considered as on the date of the agreement per section 50C. The assessee further contended that the difference between the agreement value and the stamp duty value was minimal, ranging from 1% to 9%, and should not be added to the income under section 56(2)(vii)(b)(ii).

The Tribunal analyzed the statutory provisions and noted that the third proviso to section 50C(1) provides an exception if the difference is within 10%. The Tribunal held that this proviso should be read into section 56(2)(vii)(b)(ii) to provide true meaning to the legislative intent. Thus, the assessee is eligible for the benefit of a 10% margin difference, and no addition can be made if the variation falls within this range. The Tribunal deleted the addition of ?23,30,694/-.

2. Disallowance of ?1,50,000/- and ?1,73,308/-:

The assessee claimed deductions for development charges and bank interest while computing long-term capital gain. The assessing officer disallowed these deductions, reasoning they are not allowable under section 48 of the Act. The Commissioner (Appeals) upheld this disallowance.

The assessee argued that the payments to the builder and capitalized interest should enhance the cost of acquisition. However, the Tribunal found that the other charges, such as maintenance and electricity connection, do not form part of the cost of acquisition or improvement. Additionally, the assessee failed to provide details of the interest expenditure and prove it was incurred exclusively for the transfer of the capital asset. The Tribunal upheld the disallowance of these deductions.

3. Charging of interest under sections 234A, 234B, and 234C:

The assessee contested the interest charged under sections 234A, 234B, and 234C. The Tribunal noted that the levy of interest is consequential in nature and does not require separate adjudication.

Conclusion:

The appeal was partly allowed, with the Tribunal deleting the addition under section 56(2)(vii)(b) but upholding the disallowance of development charges and bank interest. The interest charged under sections 234A, 234B, and 234C was deemed consequential and not adjudicated separately.

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