2024 (9) TMI 1781 - AT - Income Tax

Excess Stamp Duty Value Under 10% of Consideration Not Taxable Under Section 56(2)(x)(b) of the Act

Tushar Ramnath Shetty Versus The Income Tax Officer Ward 23 (3) (1), Mumbai

Tushar Ramnath Shetty Versus The Income Tax Officer Ward 23 (3) (1), Mumbai - TMI ISSUES: Whether the addition under section 56(2)(x)(b) of the Income Tax Act, 1961, can be made on the difference between stamp duty value and actual consideration for immovable property when the excess is less than 10% of the consideration.Whether the amendment by Finance Act, 2020 increasing the tolerance limit from 5% to 10% under section 56(2)(x)(b) is applicable retrospectively or prospectively.Whether the assessee's claim that the difference in value arose due to an error in the area stated in the sale agreement can negate the addition under section 56(2)(x)(b).Whether the failure to furnish the sale agreement or sale deed justifies confirming the addition under section 56(2)(x)(b). RULINGS / HOLDINGS: On the applicability of section 56(2)(x)(b), the Court held that since the excess of stamp duty value over the purchase consideration (Rs. 5,58,000) is less than 10% of the consideration (Rs. 9,00,000), 'the provisions of section 56(2)(x)(b) of the Act are not applicable' and therefore the addition is deleted.The amendment increasing the tolerance limit from 5% to 10% under section 56(2)(x)(b) by the Finance Act, 2020 is 'clarificatory/curative in nature' and must be applied retrospectively to the assessment year under consideration.The Court did not accept the contention that the difference arose due to an error in the area stated in the agreement as sufficient to negate the addition, but this became academic given the retrospective applicability of the 10% tolerance band.The finding that the assessee neither furnished the sale agreement nor sale deed was noted but held irrelevant in light of the retrospective application of the amended tolerance limit, thus the addition was set aside. RATIONALE: The Court applied the statutory framework of section 56(2)(x)(b) of the Income Tax Act, 1961, which deems excess of stamp duty value over consideration as income from other sources if it exceeds the higher of Rs. 50,000 or 5% (later 10%) of the consideration.Reliance was placed on coordinate bench decisions interpreting the Finance Act, 2020 amendment as retrospective, emphasizing the amendment's 'curative' character to mitigate hardship arising from small bona fide variations between sale consideration and stamp duty valuation.The Court analogized the retrospective application of the amendment under section 56(2)(x)(b) with similar retrospective interpretations of amendments to sections 50C and 43CA, which also deal with valuation differences in immovable property transactions.The Tribunal underscored that the tolerance band increase reflects a pragmatic approach acknowledging 'various bona fide reasons explaining the small variations' and that such amendments serve as 'remedial measures' to prevent unjust invocation of anti-avoidance provisions.No dissenting or differing opinion was expressed; the Court followed established coordinate bench precedents without doctrinal shift.