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September 17, 2021

ITAT discusses Scope of exception to Agreement Vs Stamp Duty Value

ITAT discusses Scope of exception to Agreement Vs Stamp Duty Value

Fact and Issue of the case

Briefly the facts are, the assessee, an individual, is stated to be engaged in the business of trading in imitation jewellery. For the assessment year under dispute, assessee filed his return of income on 30-09-2015 declaring total income of Rs.6,28,420/-. The assessee also declared current year loss of Rs.76,18,500/-. Subsequently, on 30-09-2016 assessee filed a revised return of income declaring total income of Rs.6,20,650/- and current year’s loss of Rs.79,43,584/-. In course of assessment proceedings, the assessing officer, based on information available on record, noticed that in the year under consideration the assessee had purchased four immovable properties. From the details furnished, he found that the declared sale consideration shown by the assessee is lesser than the stamp duty value (market value) determined by the stamp duty authority. The difference in value in respect of the subject properties worked out to a total amount of Rs.23,30,695/-. Therefore, the assessing officer called upon the assessee to explain why said differential amount should not be added to the income of the assessee under section 56(2)(vii)(b) of the Act. In response to the show cause notice, the assessee submitted that the declared value as per the sale agreement is based on the value on the date of agreement on 30-12-2014, whereas, he submitted, the agreements were registered on 13-01-2015 and 21-01-2015. Thus, he submitted, the difference in the market value of property as per the stamp duty authority was due to delay in registration of the sale agreements. Further, he submitted that there are various other reasons for which the declared sale consideration is the actual market value and not the stamp duty value. The assessing officer, however, did not find merit in the submissions of the assessee and added back the amount of Rs.23,30,694/- by invoking the provisions of section 56(2)(vii)(b)(ii) of the Act. Though, the assessee contested the aforesaid addition before learned Commissioner (Appeals); however, he was unsuccessful.

Observation of the Tribunal

Tribunal has considered rival submissions in the light of decisions relied upon and perused materials on record. The undisputed facts emanating from record are, during the year under consideration, the assessee had purchased four movable properties. Admittedly, there is a difference in value of the properties as declared in the sale agreement and as determined by the stamp duty authority. The details of the properties purchased, value declared by the assessee, value determined by the stamp duty authority and the difference in value are described hereunder in a tabular form:-

PropertyDate of agreementAgreement valueDate of RegistrationMarket

As could be seen from the above, admittedly, there is a difference between the value determined by the stamp duty authority for stamp duty purpose and the agreement value. Such difference aggregated to Rs.23,30,694/-. The learned authorized representative of the assessee has submitted before us that the variation in value in respect of property at serial no.1 is 1%; in respect of property at serial no.2 is 1.43%; in respect of property at serial no.3 is 0.99% and in respect of property at serial no.4 is 9%. Thus, the variation in the value declared by the assessee and as determined by the stamp duty authority is between 1% to 2% in respect of three properties; and in respect of one property it is 9%. Before the first appellate authority, the assessee had specifically pleaded that since the difference in value is less than 10%, no addition can be made keeping in view the third proviso to section 50C(1) and the provisions of section 56(2)(x) of the Act. Apparently, learned Commissioner (Appeals) has rejected the aforesaid contention of the assessee for two reasons. Firstly, the provisions of section 56(2)(x) would be applicable from assessment year 2019-20; and secondly, in respect of one of the properties, the difference in value works out to more than 5%. Thus, keeping in perspective the aforesaid factual position, we proceed to decide the validity of the addition made.

It is further relevant to observe, section 50C or for that matter section 56(2)(vii)(b)(ii) are identical provisions. Only difference being, 50C is applicable to the seller of an immovable property, whereas, the later provision is applicable to the buyer of the property. Therefore, a benefit given to a seller of the property in respect of marginal variation cannot be denied to the buyer of the property, since, they stand on the same footing. This aspect of the issue has also been considered by the co-ordinate bench in case of Shri Sandip Patil vs ITO (supra), wherein, the co-ordinate bench has held that there cannot be two different fair market value in respect of the very same property, i.e. one at the hands of the seller and the other at the hands of the buyer. Thus, in our view, if the difference in valuation between the value determined by the stamp duty authority and the declared sale consideration is less than 10%, no addition can be made under section 56(2)(vii)(b)(ii) of the Act.

Having held so, the second aspect of the issue which requires consideration is whether the exception to section 50C(1) by way of third proviso and section 56(2)(x)(b)(B) would apply prospectively or retrospectively. The issue is no more res integra in view of a number of decisions of different benches of the Tribunal. The Tribunal has consistently expressed the view that since the aforesaid amendments made by Finance Act, 2018 with effect from 01-04-2019 are curative in nature and beneficial provisions, it would apply retrospectively. In this context, we get support from the following decisions:-

1. Shri Sandip Patil vs ITO (supra)

2. Maria Fernandes Cheryl vs ITO (supra)

Thus, keeping in view the discussions hereinabove, tribunal delete the addition of Rs.23,30,694/-. This ground is allowed. In ground 2 assessee has challenged the disallowance of Rs.1,50,000/- and Rs.1,73,308/- being deduction claimed towards cost of acquisition/improvement.

Briefly the facts are, while computing long term capital gain the assessee claimed deduction of Rs.1,50,000/- towards other charges paid to builder and bank interest of Rs.1,73,308/-. The assessing officer disallowed the deduction claimed on the reasoning that they are not allowable under section 48 of the Act. Learned Commissioner (Appeals) also upheld such disallowance.

Before us, learned authorized representative submitted that the assessee has paid certain amount to builder which would go to increase the cost of acquisition. Further, he submitted, interest paid has also been capitalized in the books of account which will enhance the cost of acquisition. Thus, he submitted, deductions claimed have to be allowed. In support, he relied upon a decision of the Tribunal in the case of Parvati Devi Totlani vs ITO, ITA No. 120/JP/2019 dt 28­02-20. Per contra, learned departmental representative submitted, the deduction claimed by the assessee does not form part of the sale consideration; therefore, it cannot be treated either as cost of acquisition or cost of improvement. Further, she submitted, since the assessee has capitalized the interest, no further deduction can be allowed.

Having considered rival submissions and perused materials on record, tribunal find that the other charges comprise of maintenance charges, water charges, electricity connection charges, etc. In our view, these payments cannot form part of either the cost of acquisition or cost for improvement. Similarly, details of interest expenditure have not been furnished by the assessee. Further, the assessee has failed to prove that such expenditure was incurred wholly and exclusively for the purpose of transfer of the capital asset. That being the case, we are unable to accept assessee’s claim of deduction. The decision relied upon by the learned authorized representative being based on its own facts, is not applicable to the present case.


The tribunal has ruled in favour of the assessee and disposed of the appeal

Read the full order from below


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