2024 (7) TMI 1337 - AT - Income Tax

Income from other sources u/s 56(2)(x) - difference in the stamp duty value and actual purchase value - HELD THAT - . We find that the AO has drawn support from the provisions of Section 56(2)(x) of the Act. In our understanding of the law, Section 50C of the Act applies to the seller whereas Section 56(2)(x) applies of the buyer. Accordingly, immovable property is restricted only to land or building or both but not applicable to a developer who has taken over the possession of lawn or building or both for the purpose of the development in terms of the relevant development agreement or MOU for development of a property. The assessee has not purchased any immovable property but has only acquired development rights and considering the facts of the case, in light of the decision of in the case of Seshasayee Steels (P) Ltd 2019 (12) TMI 702 - SUPREME COURT we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, the effective grounds raised by the revenue are dismissed.

Summary

Issues:
Appeal and cross-objection against the order of NFAC, Delhi for AY 2020-21.

Analysis:
The case involved an appeal by the revenue and cross-objection by the assessee against the NFAC order for the assessment year 2020-21. The appeal and cross-objection were disposed of through a common order for convenience. Both sides were heard, and the case records were reviewed along with relevant evidence as per ITAT Rules, 1963.

The primary issue revolved around the addition of the difference between stamp duty value and actual purchase value of immovable properties as income from other sources under section 56(2)(x) of the Act. The AO contended that the difference should be added to the total income of the assessee. However, the assessee argued that it was engaged in construction work and had acquired development rights through agreements, not physical possession of the properties. The Tribunal examined the conveyance deed and MOU, concluding that the assessee had acquired only development rights, not ownership of the properties.

The Tribunal referred to the Supreme Court case of Seshasayee Steels (P) Ltd. vs. ACIT, highlighting that possession under section 53A of the Transfer of Property Act requires actual physical control over the land, which was not the case here. The Tribunal also differentiated between section 50C applicable to sellers and section 56(2)(x) applicable to buyers of immovable property. It emphasized that the provision does not apply to developers acquiring development rights.

Further, the Tribunal analyzed the provisions of section 56(2)(x)(b) of the Act, which specifies the treatment of income from immovable property. Given the nature of the transaction and the legal principles involved, the Tribunal upheld the findings of the CIT(A) and dismissed the revenue's appeal. Consequently, the cross-objection by the assessee was deemed academic and not adjudicated upon.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the decision based on the legal interpretation of the relevant provisions and the nature of the transaction. The judgment was pronounced in Mumbai on 25th July 2024.