2023 (3) TMI 666 - AT - Income Tax

Income from other sources u/s. 56(2)(x) - difference of stamp duty value and the actual consideration - tolerance band limit from 5% to 10% under section 56(2)(x) to be treated as clarificatory/curative - Assessee argued amendment by Finance Act, 2020 to section 56(2)(x) wherein the safe harbour limit (tolerance band) has been increased from 5% to 10% and as such if the difference between valuation for stamp duty and the actual consideration is 10% or less, the same shall be ignored - HELD THAT - Considering the submissions made by the assessee and the undisputed facts relating to quantum of difference and by placing reliance on the observations and finding of the Coordinate Bench of ITAT, Mumbai in the case of Maria Fernandes Cheryl 2021 (1) TMI 620 - ITAT MUMBAI followed in the case of Karb Associates Pvt. Ltd. 2021 (8) TMI 1184 - ITAT KOLKATA we unhesitatingly hold that the amendment of increasing the tolerance band from 5% to 10% under section 56(2)(x) brought in by Finance Act, 2020 had to be read retrospectively being clarificatory/curative in nature and, therefore, since the difference between the valuation for stamp duty and the actual consideration is less than 10%, which in the present case is 5.93%, no addition is called for. Accordingly, grounds taken by the assessee in this respect are allowed.

Summary

Issues Involved:
1. Applicability of the amendment to section 56(2)(x) of the Income-tax Act, 1961.
2. Retrospective application of the increased tolerance band from 5% to 10%.

Summary of Judgment:

Issue 1: Applicability of the Amendment to Section 56(2)(x)
The core issue in this appeal is whether the amendment to section 56(2)(x) of the Income-tax Act, 1961, which increased the tolerance band from 5% to 10%, applies retrospectively. The assessee purchased a property with a transaction value of Rs. 82,91,250, while the stamp duty value was Rs. 87,83,700, resulting in a difference of Rs. 4,92,450. The assessee contended that this difference should be ignored under the amended provision of section 56(2)(x), which allows a tolerance band of 10%.

Issue 2: Retrospective Application of the Increased Tolerance Band
The Tribunal examined whether the amendment introduced by the Finance Act, 2020, effective from 01.04.2021, should be applied retrospectively. The assessee argued that the amendment is clarificatory/curative in nature and should apply retrospectively. The Tribunal referred to several decisions, including those of the Coordinate Bench of ITAT, Mumbai, and ITAT, Kolkata, which held that such amendments are retrospective. The Tribunal noted that the amendment was intended to address genuine hardships and should be applied retrospectively to avoid unintended consequences.

Tribunal's Findings:
The Tribunal found that the amendment to increase the tolerance band from 5% to 10% is curative and should be applied retrospectively. The difference between the stamp duty value and the actual consideration in this case was 5.93%, which falls within the 10% tolerance band. Therefore, the addition made by the Assessing Officer (AO) was not justified.

Conclusion:
The Tribunal allowed the appeal, holding that the increased tolerance band of 10% under section 56(2)(x) should be applied retrospectively. Consequently, the difference of Rs. 4,92,450, which is 5.93% of the actual consideration, should be ignored, and no addition is warranted.

Order:
The appeal of the assessee is allowed, and the order was pronounced in the open court on 13th March 2023.