2022 (12) TMI 533 - AT - Income Tax

Addition u/s. 56(2)(vii)(b) - difference between the Stamp Duty valuation as on the date of registration less the actual consideration paid - assessee submitted that the sale consideration agreed in the letter of allotment can be treated as an agreement for this purpose - assessee submitted that in so far as the ground of Revenue that the sale consideration is less than stamp duty valuation on the date of registration, the assessee has two fold submissions - date of allotment would be the date of purchase of immovable property - HELD THAT - A bare perusal of the first Proviso to section 56(2)(vii)(b) would show that where the date of agreement fixing the amount of consideration for transfer of immovable property and the date of registration are not same, the stamp duty value as on the date of the agreement may be taken. The provisions of clause (b) to section 56(2)(vii) were amended by the Finance Act, 2013 w.e.f. 01/04/2014. CIT(A) in the impugned order referred to the Memorandum to the Finance Act, 2013 explaining the reason for amending the provisions of section 56(2)(vii)(b) - The purpose for introducing proviso to clause (b) to section 56(2)(vii) of the Act was to avoid taxable differential arising due to time gap between the booking of a property and registration of sale deed. In the case PCIT vs. Vempu Vaidyanathan 2019 (1) TMI 1361 - BOMBAY HIGH COURT has held that for computing capital gain tax, the date of allotment of flat would be the date on which the purchaser of flat is stated to have acquired property. In the instant case, on the date of allotment the building was under construction and even on the date of registration of sale deed the assessee had not taken possession of the immovable property. Assessee had acquired right in the ownership of flat at the time of issuance of allotment letter. Therefore, in the facts of the case stamp duty value as on the date of allotment of flat is relevant. CIT(A) in the impugned order has referred to various decisions explaining the term transfer as per section 2(47) of the Income Tax Act - We concur with the findings of the CIT(A), hence, the same are upheld and the appeal of the Revenue is dismissed being devoid of any merit. Appeal by the Revenue is dismissed.

Summary

Issues Involved:
Appeal against deletion of addition under section 56(2)(vii)(b) of the Income Tax Act, 1961 for the Assessment Year 2014-15.

Detailed Analysis:

Issue 1: Addition under section 56(2)(vii)(b) of the Act
The Revenue appealed against the CIT(A)'s decision to delete the addition of Rs.5,13,25,000 under section 56(2)(vii)(b) of the Income Tax Act, 1961. The dispute arose from the purchase of property in a building known as "Shrikant Chambers -II" where the assessee's parents made payments directly to the developer through various cheques. The Assessing Officer disbelieved the submissions and gift deeds, leading to the addition. The CIT(A) reviewed the facts and documents, concluding that the sale consideration was more than the stamp duty value at the time of agreement, making the provision of section 56(2)(vii)(b) inapplicable. The CIT(A) referred to the Memorandum to the Finance Act, 2013 and various decisions to support the decision.

Issue 2: Date of Allotment and Stamp Duty Value
The date of allotment was crucial in determining the applicability of section 56(2)(vii)(b). The CIT(A) emphasized that the rights in the flat were acquired by the appellant at the time of allotment, extinguishing the builder's rights. The stamp duty value at the date of allotment was considered relevant, as the appellant had acquired ownership rights at that time. The CIT(A) cited Board Circular No. 672 and the provisions of section 56(2)(vii)(b) to support the decision to delete the addition.

Issue 3: Interpretation of 'Transfer' and Relevant Provisions
The CIT(A) analyzed the term 'transfer' under section 2(47) of the Act and concluded that the letter of allotment extinguished the builder's rights in favor of the appellant. By signing the letter of allotment, the appellant agreed to buy the property, acquiring all rights in the flat. The CIT(A) highlighted the importance of the agreement fixing the consideration and the stamp duty value at the time of agreement in determining the applicability of section 56(2)(vii)(b).

Conclusion:
The ITAT Mumbai upheld the CIT(A)'s decision to delete the addition under section 56(2)(vii)(b) of the Act, dismissing the Revenue's appeal. The judgment emphasized the significance of the date of allotment, the rights acquired by the appellant, and the stamp duty value at the time of agreement in determining the tax implications of the transaction. The peripheral issues raised by the Assessing Officer were deemed immaterial to the main controversy and were not deliberated upon.