2024 (2) TMI 1501 - AT - Income Tax

Section 56(2)(x) addition deleted: agreement date controls property acquisition, not allotment letter date

The ITAT Mumbai held that for additions under section 56(2)(x), the date of agreement should be considered as the date of acquisition of immovable ... Addition u/s 56(2)(x) - considering the date of acquisition of immovable property as the date of agreement and not the date of allotment letter - whether the exception under the first proviso is applicable since the same mentions the date of agreement to be considered and that in assessee's case whether the letter of allotment is the agreement to sell in order to consider the stamp duty value on that date and not the date of sale? HELD THAT:- In assessee's case the advance payment is made through account payee check and the allotment letter with the terms of balance payment and other conditions of delivery of flat etc is issued. Therefore above decision of the Hon'ble Tribunal of Parth Dashrath Gandhi [2023 (1) TMI 1253 - ITAT MUMBAI] is applicable to assessee's case also. Accordingly we hold that the addition made by the AO is not sustainable and be deleted. Appeal of the assessee is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question in this case revolves around the application of Section 56(2)(x) of the Income Tax Act, specifically whether the date of an allotment letter can be considered as the date of agreement for the purpose of determining the stamp duty value applicable to the acquisition of immovable property. The issue is whether the addition of Rs. 17,12,962/- made by the Assessing Officer (AO) under Section 56(2)(x) was justified, considering the date of acquisition as the date of agreement rather than the date of the allotment letter.2. ISSUE-WISE DETAILED ANALYSIS- Relevant legal framework and precedentsThe legal framework in question is Section 56(2)(x) of the Income Tax Act, which stipulates that if an immovable property is acquired for a consideration less than its stamp duty value by an amount exceeding Rs. 50,000/-, the difference is taxable as income from other sources. The proviso to this section allows for the stamp duty value on the date of agreement to be considered if the consideration or part thereof is paid by specified modes on or before the date of the agreement.- Court's interpretation and reasoningThe Tribunal examined whether the allotment letter could be considered an 'agreement' for the purposes of the proviso to Section 56(2)(x). The Tribunal referred to precedents where it was held that an allotment letter could be considered as an agreement to sell, provided certain conditions were met, such as payment being made through banking channels as specified in the proviso.- Key evidence and findingsThe key evidence included the allotment letter dated 02.03.2015 and the payment of Rs. 11,00,000/- made on 06.02.2015. The AO had raised concerns about the credibility of the allotment letter, noting discrepancies such as the lack of signatures and the letter not being registered or notarized.- Application of law to factsThe Tribunal applied the law by considering whether the conditions of the proviso to Section 56(2)(x) were met. It found that the payment was made through an account payee cheque, fulfilling one of the proviso's requirements. The Tribunal also considered precedents where similar allotment letters were treated as agreements for the purposes of the proviso.- Treatment of competing argumentsThe Tribunal considered the Revenue's arguments regarding the discrepancies in the allotment letter and its credibility. However, it gave weight to the precedents and the fact that the payment was made through a specified mode, leading to the conclusion that the proviso could apply.- ConclusionsThe Tribunal concluded that the allotment letter should be treated as an agreement for the purposes of Section 56(2)(x), and therefore, the stamp duty value on the date of the allotment letter should be considered. The addition made by the AO was not sustainable and was deleted.3. SIGNIFICANT HOLDINGS- Preserve verbatim quotes of crucial legal reasoning'In assessee's case the advance payment is made through account payee check and the allotment letter with the terms of balance payment and other conditions of delivery of flat etc is issued. Therefore in our considered view, the above decision of the Hon'ble Tribunal is applicable to assessee's case also.'- Core principles establishedThe Tribunal established that an allotment letter can be considered as an agreement for the purposes of Section 56(2)(x) if the payment conditions specified in the proviso are met. This includes making part payment through specified banking channels before the execution of the sale agreement.- Final determinations on each issueThe Tribunal determined that the AO's addition under Section 56(2)(x) was not justified, as the conditions of the proviso were met, and the stamp duty value on the date of the allotment letter should be considered. The appeal was allowed, and the addition was deleted.