2022 (11) TMI 415 - AT - Income Tax

Addition invoking provisions u/s 56(2)(vii)(b) - difference of stamp value minus sales consideration - assessee only received lease hold right for 99 years - to be equated with purchase of immovable property or not - As submitted that section 56(2)(vi)(b) is deeming fiction and it is settled preposition that deeming provision cannot be extended beyond the purposed for which it is enacted and section 56(2)(vii)(b) applies only in the cases of transfer of Immovable property takes place but not where the transfer of rights in the immovable property takes place - HELD THAT - The definition of property does not refer to rights or transactions which may enable use or enjoyment of property and it appears that having regards to description context and objective, acquisition of such rights cannot be equated with immovable property. As relying on Bhavna Shashikant Ghone 2022 (9) TMI 919 - ITAT PUNE we are of the view that Section 56(2)((vii)(b) cannot be applied in assessee s case. It is also noteworthy to mention that letter dated 6-01-2014 issued by RIICO in favour of M/s. Unique Impex is clear evidence that the assessee only received lease hold right for 99 years . Hence, in view of above deliberations and the case laws mentioned hereinabove, the Bench does not concur with the view of the ld. CIT(A) and the addition sustained by the ld. CIT(A) is directed to be deleted. Thus the solitary ground of the assessee is allowed.

Summary

Issues:
1. Addition under section 56(2)(vii)(b) of the Income Tax Act, 1961.

Analysis:

Issue 1: Addition under section 56(2)(vii)(b) of the Income Tax Act, 1961

The case involved an appeal against the order of the ld. CIT(A)-2, Jaipur for the assessment year 2014-15 regarding the addition of Rs.26,10,078/- under section 56(2)(vii)(b) of the Income Tax Act, 1961. The assessee argued that this provision applies only to immovable property like land or building, not lease rights in land. The AO, however, disagreed, stating that the term "immovable property" includes rights in land or building. The ld. CIT(A) upheld the AO's decision, emphasizing that in this case, the assessee purchased both land and building, making the provision applicable. The assessee contended that deeming provisions cannot extend beyond their intended scope and cited relevant case laws. The ITAT Pune Bench's decision in a similar case supported the assessee's argument, stating that leasehold rights do not fall under the definition of "immovable property" as per section 56(2)(vii)(b). The Bench concurred with this view, ruling in favor of the assessee and directing the deletion of the addition. The appeal was allowed based on this analysis.

In conclusion, the ITAT Jaipur ruled in favor of the assessee, allowing the appeal and directing the deletion of the addition made under section 56(2)(vii)(b) of the Income Tax Act, 1961. The decision was based on the interpretation that leasehold rights do not constitute immovable property as defined in the relevant provision. The judgment highlighted the importance of legal definitions and the application of deeming provisions within the scope of the law.