Allotment letter from developer constitutes valid purchase agreement under section 56(2)(vii)(b)(ii), valuation date is first payment date

ITAT Kolkata held that an allotment letter from a developer constitutes an agreement to purchase, not requiring registration if payments are made through banking channels. The tribunal ruled that for deemed gift provisions under section 56(2)(vii)(b)(ii), the valuation date should be when first payment was made (June 2010), not the stamp duty payment date (October 2014). Applying CBDT Circular 872/1993, the allotment letter was recognized as a valid purchase agreement. Since payments were made through account payee cheques establishing genuineness, the addition under deemed gift provisions was deleted and the appeal was allowed.

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Issues:
1. Interpretation of section 56(2)(vii)(b)(ii) of the Income Tax Act regarding deemed gift in case of property purchase.
2. Consideration of allotment letter as an agreement for property purchase.
3. Application of CBDT Circular No. 872 dated 16.12.1993 in determining the nature of allotment letters by developers.

Analysis:

The judgment by the Appellate Tribunal ITAT Kolkata involved an appeal by the assessee against an order regarding the addition made under section 56(2)(vii)(b)(ii) of the Income Tax Act concerning the purchase of a property jointly with his wife. The dispute revolved around the valuation of the property and whether the difference between the declared value and stamp duty valuation constituted a deemed gift.

The Tribunal examined the provisions of section 56(2)(vii)(b) of the Income Tax Act, emphasizing the significance of the proviso related to the date of agreement and stamp duty valuation for property transfers. It was established that any variance between the declared consideration and stamp duty value could result in a deemed gift, as per the statutory provisions.

A crucial issue in the case was the determination of whether the allotment letter provided by the developer could be construed as an agreement for the property purchase. The Tribunal meticulously reviewed the allotment letter, payment history, and banking transactions to ascertain the genuineness of the agreement. It was concluded that the allotment letter, supported by payments through account payee cheques, constituted a valid agreement for the purchase of the property.

Furthermore, the Tribunal referred to CBDT Circular No. 872 dated 16.12.1993, which recognized allotment letters by developers as agreements for property purchase, akin to construction activities. By applying the principles outlined in the circular, the Tribunal concluded that the allotment letter issued in 2010 should be considered an agreement, entitling the assessee to the benefit of the proviso under section 56(2)(vii)(b). Consequently, the Tribunal allowed the appeal and annulled the addition made by the Assessing Officer.

In light of the above analysis, the Tribunal ruled in favor of the assessee, emphasizing the validity of the allotment letter as an agreement for property purchase and the applicability of the CBDT circular in determining the tax implications.

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