ITAT Mumbai: Stamp duty value on date of allotment to be considered for section 56(2)(vii)(b) (of Income Tax Act, 1961) assessment.

Case Name:

Rekha Singh v. ITO

ITA No. 2406/Mum/2023

Key Takeaways:

1. The ITAT Mumbai has allowed the consideration of stamp duty value on the date of allotment for section 56(2)(vii)(b) (of Income Tax Act, 1961) assessment.
2. The provisos to section 56(2)(vii)(b) (of Income Tax Act, 1961) should be fulfilled for the stamp duty value on the date of allotment to be considered.
3. It is immaterial who made the payment before the date of registration if the property is jointly owned.
4. The ITAT directed the AO to consider the stamp duty value on the date of allotment rather than the stamp value on the date of registration.

Case Synopsis:

This is an order from the Income Tax Appellate Tribunal “SMC” Bench in Mumbai. The case number is ITA No. 2406/Mum/2023, and it pertains to the assessment year 2015-16. The appellant in this case is Rekha Singh, residing at F 1103, Sai Radha Complex, LBS Marg, Bhandup (W), Mumbai-400078. The respondent is the Income Tax Officer (ITO) 29(3)(2), located at 307, 3rd Floor, C-10, Pratyaksh Kar Bhavan, Bandra Kurla Complex, Mumbai-400051.

The order was pronounced by Amarjit Singh, the Accountant Member, and Kuldip Singh, the Judicial Member, on 30.10.2023. The date of hearing was 11.10.2023.

The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] on 25.05.2023. The grounds of appeal raised by the assessee are as follows:

The CIT(A) has erred in confirming the addition made by the Assessing Officer (AO) under section 56(2)(vii)(b) (of Income Tax Act, 1961) amounting to Rs. 24,33,350/-

The CIT(A) has erred in denying the benefit of Section 56(2)(vii)(b) (of Income Tax Act, 1961) by stating that the Letter of Allotment is not a registered sale deed and thus cannot be considered as the date of agreement.

The CIT(A) has also erred in confirming the addition by stating that the payments before the date of registration have been made only by the other co-owner of the property.

The appellant reserves the right to alter, amend, or alter the grounds of appeal as they may think fit.

The brief facts of the case are as follows: The assessee filed a return of income declaring a total income of Rs. 5,93,520/- for the assessment year 2015-16. The case was subject to limited scrutiny assessment, and a notice under section 143(2) (of Income Tax Act, 1961) was issued to the assessee. During the assessment, the AO observed that the assessee had purchased an immovable property jointly with her husband for a consideration of Rs.84,15,300/-. The Stamp Duty Authority determined the value of the property to be Rs.1,32,82,000/-. Since the value determined by the Stamp Duty Authority was higher than the agreement value, the AO applied the provisions of section 56(2)(vii)(b) (of Income Tax Act, 1961). The assessee argued that the proviso to section 56(2)(vii) (of Income Tax Act, 1961) allows the stamp duty value on the date of the agreement to be considered if the consideration has been paid by any mode other than cash on or before the date of the agreement. The date of the agreement was 16.12.2010, and the purchase deed was registered on 29.12.2014. The first payment of Rs.1 lakh was made on 18.10.2010 by the husband of the assessee. However, the AO did not accept the assessee’s submission and made an addition of 50% of the total difference between the stamp duty value and the consideration as income in the assessee’s hands.

The assessee filed an appeal before the CIT(A), who upheld the AO’s addition. The CIT(A) held that since the payment before the date of registration was made only by the other co-owner (the husband), the addition was justified. The assessee argued before the ITAT that it is irrelevant who made the payment before the date of registration since the property was purchased jointly. The ITAT considered the provisions of section 56(2)(vii)(b) (of Income Tax Act, 1961) and the decisions of the Mumbai ITAT and Pune ITAT, which held that the stamp duty value on the date of the agreement should be considered if the provisos to section 56(2)(vii)(b) (of Income Tax Act, 1961) are fulfilled. The ITAT directed the AO to consider the stamp duty value on the date of allotment (16.10.2010) for the purpose of section 56(2)(vii)(b) (of Income Tax Act, 1961) and not the stamp value on the date of registration.

In conclusion, the ITAT partly allowed the appeal of the assessee and directed the AO to consider the stamp duty value on the date of allotment for the purpose of section 56(2)(vii)(b) (of Income Tax Act, 1961). The ITAT also held that it is immaterial who made the payment before the date of registration since the property was jointly owned by the assessee and her husband.

FAQ:

Q1: What is section 56(2)(vii)(b) (of Income Tax Act, 1961)?

A1: Section 56(2)(vii)(b) (of Income Tax Act, 1961) pertains to the taxation of income from other sources. It states that if an immovable property is received for a consideration less than its stamp duty value, the difference between the stamp duty value and the consideration is treated as income in the hands of the recipient.

Q2: What are the provisos to section 56(2)(vii)(b) (of Income Tax Act, 1961)?

A2: The provisos to section 56(2)(vii)(b) (of Income Tax Act, 1961) allow the stamp duty value on the date of the agreement to be considered if the consideration has been paid by any mode other than cash on or before the date of the agreement.

Q3: What was the issue in the Rekha Singh v. ITO case?

A3: The issue in this case was whether the stamp duty value on the date of allotment or the stamp value on the date of registration should be considered for section 56(2)(vii)(b) (of Income Tax Act, 1961) assessment.

Q4: What was the decision of the ITAT Mumbai?

A4: The ITAT Mumbai held that the stamp duty value on the date of allotment should be considered for section 56(2)(vii)(b) (of Income Tax Act, 1961) assessment. It also stated that it is immaterial who made the payment before the date of registration if the property is jointly owned.

1. The present appeal filed by the assessee is directed against the order passed u/s 250 (of Income Tax Act, 1961) ([hereinafter “the Act”] by the Learned Commissioner of Income Tax (Appeals)- 40 [hereinafter „the CIT(A)‟] dated 25.05.2023 for A.Y 2015-16.

2. The grounds of appeal of the assessee as following as under:

1. The Ld. CIT(Appeals) (NFAC) has erred in confirming the addition made by the Ld. AO u/s 56(2)(vii)(b) (of Income Tax Act, 1961) amounting to Rs. 24,33,350/-

2. The Ld. CIT(Appeals ((NFAC) has erred in denying the benefit of Section 56(2)(vii)(b) (of Income Tax Act, 1961) by stating that Letter of Allotment is not a registered sale deed and thus cannot be considered as date of agreement.

3. The Ld. CIT(Appeals) (NFAC) has also erred in confirming the addition by stating that the payments before the date of registration have been made only by the other co-owner of the property.

4. The appellant further reserves the right to alter, amend, or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives.

3. Fact in brief is that return of income declaring total income at 5,93,520/- was filed on 27.08.2015. The case was subject limited scrutiny assessment and notice u/s 143(2) (of Income Tax Act, 1961) was issued and served upon the assessee. During the course of assessment the AO observed that the assessee has purchased immovable property for a consideration of ₹ 84,15,300/- as a coowner jointly with her husband Shri. Ajay Kumar Singh. The purchased consideration was paid by both the co-owner. The assessee was a co-owner of the property having 50% share. The AO noticed that purchased value of the property was of ₹84,15,300/- whereas the value of the property determined by the Stamp Duty Authority was of ₹ 1,32,82,000/-. Since, the value determined by the Stamp Duty Authority was more than the agreement value of the property, therefore, the AO was of the view that provision of section 56(2)(vii)(b) (of Income Tax Act, 1961) to be applied. On query the assessee explained that as per the proviso to section 56(2)(vii) (of Income Tax Act, 1961) where date of agreement fixing amount of consideration for the transfer of immovable property and the date of registration are not the same, the Stamp Duty value on date of agreement may be taken for the purpose of this clause provided that the amount of consideration has been paid by any mode other than cash on or before the date of agreement for the transfer of such immovable property. In the case of the assessee the date of the agreement was 16.12.2010 whereas purchase deed was registered on 29.12.2014. The first payment of 1 lacs through banking channel has been made on 18.10.2010 by the husband of the assessee. However, the AO has not agreed with the submission of the assessee and stated that since the property was transferred for the consideration which was less than the stamp duty value, therefore, 50% of the total difference was assessable as income in the assessee‟s hand.

4. The assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) has rejected the appeal of the assessee holding that since the payment before date of registration has been made only by the other co-owner of the property i.e. Mr. Ajay Kumar Singh husband of the assessee, and justified the action of the AO in making the addition of ₹ 24,33,350/- under section 56(2)(vii)(b) (of Income Tax Act, 1961). During the course of appellate proceedings before us, The Ld. Counsel submitted that other co-owner of the property was assessee‟s husband and the property was purchased in their joint name and it is irrelevant as to who of them has made the payment before the date of registration. The Ld. Counsel further submitted that since the agreement for the property was entered on 16.12.2010, therefore, the same should be taken for the purpose of Section 56(2)(vii)(v) (of Income Tax Act, 1961) and not the date of

registration being 28.12.2014. The Ld. Counsel has also placed reliance on the decision of the co-ordinate bench, Mumbai in the case of Poonam Ramesh Shahjwan V/s ITO(IT) 4(2)(1) A.Y. 2014-15 vide ITA No. 2252/Mum/2019 and the decision of ITAT, Pune in the case of Sanjay Dattatrya Dapodikar V/s ITO, Ward 6(2) (2019) 107 taxmann.com 219 (Pune Trib.). The Ld. Counsel also

filed paper book comprising copies of letter of allotment, registered agreement for sale and stamp duty value of the property.

5. On the other hand, the Ld. DR has supported the order of the Ld. CIT(A).

6. Heard both the sides and perused material on record. The assessee along with her husband jointly purchased immovable property for a consideration of 84,15,300/-, the value of property determined by the Stamp Duty Authority was of 1,32,82,000/-. The registration of the purchased property was made on 29.12.1014. However, the property was allotted as per the letter of allotment filed dated 16.12.2010. The first cheque for payment towards the purchase of the property was made on 18.12.2010. The assessee has paid ₹ 27,73,980/- before registration of the agreement with registrar of stamps,

Maharashtra. We have perused the following provision of section 56(2)(vii)(b) (of Income Tax Act, 1961) :-

Where an individual or a Hindu undivided family receives, in any previous year. from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum

(b) any immovable property.

(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property,

(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by anymode other than cash on or before the date of the agreement for the transfer of such immovable property As per proviso to section 56(2)(vii)(b) (of Income Tax Act, 1961) as reproduced as above provides that where the date of agreement fixing amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purpose of the aforesaid provision, provided on or before a part of the consideration has been paid by any mode other than cash. We have also perused the decision of ITAT, Mumbai as referred

(supra) by the Ld. Counsel in the case of Poonam Ramesh Shahjwan wherein on the similar facts the value of the flat was determined on the date of booking of flat after taking into consideration the payment made by the assessee through banking channel before the registration of the flat as laid down in the proviso to section 56(2)(vii)(b) (of Income Tax Act, 1961). We have also considered the decision of ITAT, Pune bench referred by the Ld. Counsel as referred above in the case of Sanjay Dattatraya Dapodikar (Supra) wherein held that where date of agreement for fixing amount of consideration for purchase of a plot of land and date of registration of sale deed were different but assessee, prior to date of agreement, had paid a part of consideration by cheque, provisos to section 56(2)(vii)(b) (of Income Tax Act, 1961) being fulfilled, stamp value as on date of agreement should be applied for purpose of said section.

7. In the light of the above facts and findings we direct the AO that the stamp duty value on the date of allotment in the case of the assessee on 16.10.2010 be taken for the purpose of Section 56(2)(vii)(b) (of Income Tax Act, 1961) and not stamp value as on the date of registration of sale deed . Further, we do not find any merit in the findings of the Ld. CIT(A) that before the registration of the flat only other co-owner i.e. Ajay Kumar Singh husband of the assessee has made payment. Since, it is joint property owned by assessee and her husband and its immaterial who had made payment before the date of registration of the property. Therefore the grounds of appeals of the assessee are partly allowed.

8. In the result the appeal of the assessee is partly allowed.

Order Pronounced in Open Court on 30.10.2023

Sd/- Sd/-

(KULDIP SINGH) (AMARJIT SINGH)

JUDICIAL MEMBER ACCOUNTANT

MEMBER

Place: Mumbai

Date 30.10.2023