ITAT Mumbai Partially Allows Appeal in Section 56(2)(vii)(b) (of Income Tax Act, 1961) Case for AY 2015-16

Case Name:

Rekha Singh vs. ITO 29(3)(2) - ITAT Mumbai

Key Takeaways:

1. The stamp duty value on the date of allotment should be considered for the purpose of section 56(2)(vii)(b) (of Income Tax Act, 1961).
2. The identity of the person making the payment before the date of registration is immaterial in cases of jointly owned property.
3. The ITAT partially allowed the appeal filed by Rekha Singh against the order of the CIT(A).

Case Synopsis:

The case was heard before Kuldip Singh, Judicial Member, and Amarjit Singh, Accountant Member, at the “SMC” Bench in Mumbai.

The appellant, Rekha Singh, challenged the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] dated 25.05.2023, which confirmed the addition made by the Assessing Officer (AO) under section 56(2)(vii)(b) (of Income Tax Act, 1961) of the Income Tax Act, 1961. The appellant raised several grounds of appeal, including the denial of the benefit of Section 56(2)(vii)(b) (of Income Tax Act, 1961) and the confirmation of the addition based on the payments made before the date of registration by the other co-owner of the property.

The facts of the case are as follows:

The appellant, Rekha Singh, jointly purchased an immovable property with her husband for a consideration of ₹84,15,300.

The Stamp Duty Authority determined the value of the property to be ₹1,32,82,000, which was higher than the agreement value.

The date of the agreement for the property was 16.12.2010, while the purchase deed was registered on 29.12.2014.

The AO applied section 56(2)(vii)(b) (of Income Tax Act, 1961) of the IT Act, as the value determined by the Stamp Duty Authority exceeded the agreement value.

The appellant contended that the proviso to section 56(2)(vii) (of Income Tax Act, 1961) should be applied, as the date of the agreement and the date of registration were not the same, and the consideration had been paid by a mode other than cash before the date of the agreement.

The CIT(A) upheld the AO’s decision, stating that the payments before the date of registration were made only by the other co-owner of the property, i.e., the appellant’s husband. The appellant then appealed to the ITAT.

After considering the submissions and the relevant provisions of section 56(2)(vii)(b) (of Income Tax Act, 1961), the ITAT held that the stamp duty value on the date of allotment (16.12.2010) should be taken for the purpose of section 56(2)(vii)(b) (of Income Tax Act, 1961) and not the stamp value on the date of registration. The ITAT also noted that it was immaterial who had made the payment before the date of registration, as the property was jointly owned by the appellant and her husband.

As a result, the ITAT partly allowed the appeal of the appellant.

FAQ

Q1: What was the main issue in the Rekha Singh vs. ITO case?

A1: The main issue revolved around the application of section 56(2)(vii)(b) (of Income Tax Act, 1961), concerning the determination of the stamp duty value for an immovable property.

Q2: What was the decision of the ITAT in this case?

A2: The ITAT held that the stamp duty value on the date of allotment