2024 (11) TMI 1062 - AT - Income Tax

Property purchase agreement date determines stamp duty value calculation under section 56(2)(X), not registration date

Balakrishna Venkapppa Bhandary Versus DCIT, Circle 3 (1) (1), Mumbai

The ITAT Mumbai ruled in favor of the assessee regarding addition under section 56(2)(X) for joint property ownership. The tribunal held that when ... Addition u/s 56(2)(X) - Joint ownership of the property - HELD THAT:- On reading of the first and second proviso if the date of agreement, the amount of consideration is fixed for the transfer of immovable property and the date of registration is not the same, then the Stamp duty Value on the date of agreement is to be taken. The section further provides that the value as on date of agreement can be taken only when, the amount of consideration in the agreement was paid by account payee cheque or through electronic clearing system through a bank account on or before the date of registration of such immovable property. In the present facts of the case there is no dispute regarding the payments made by any of the mode other than through banking channels. Thus, the aforesaid proviso carves out exception by taking the stamp duty value as on the date of agreement when the payments have been made through banking channels. AO has stated that allotment letter is not a registered agreement, therefore, the value of the property has to be taken as on the date of sale registration. First of all, when builder gives an allotment letter with terms and conditions and all the rights and the value of purchase is agreed upon which was accepted by the assessee and acted upon then it is clearly covered under aforesaid proviso to section 56(2)(x) of the Act. The assessee in the present facts agreed to purchase the immovable property in an under construction premises in the year 2016 in terms of allotment letter and also made the payments before the sale was registered. Therefore, based on the above discussions and the decisions relied by the Ld.AR on this issue, we are of the opinion that, the value as on date of allotment has to be treated as stamp duty value for the purpose of aforesaid provision of section 56(2)(x) of the Act. We further note that on the date of allotment the stamp duty value was admittedly Rs. 5,67,18,369/-, whereas, the agreement value was Rs. 5,30,87,707/-. Further, as the difference is within the 10% tolerance limit applicable as per the amendment to section 56(2)(X)(b)(ii) brought into the statute w.e.f. 1.04.2021, no addition is to be made in the present facts of the assessee or his wife. Ground raised by the assessee stands allowed. Issues Involved:1. Legality and factual correctness of the CIT(A)'s order.2. Joint ownership of the property and the applicability of section 56(2)(x).3. Applicability of amended provisions of section 56(2)(x).4. Applicability of section 56(2)(x) to rights to acquire immovable property.5. Impact of GST benefits on property valuation.6. Stamp duty valuation for under-construction properties.7. Non-declaration of property ownership in tax returns.8. Referral to the Department Valuation Officer for property valuation.Detailed Analysis:1. Legality and Factual Correctness of the CIT(A)'s Order:The assessee challenged the CIT(A)'s order as being 'bad in law and on facts.' The Tribunal noted that the CIT(A) had duly considered the submissions made by the assessee, and the appellant was unable to demonstrate any prejudice resulting from the CIT(A)'s actions. Therefore, the Tribunal dismissed this ground of appeal.2. Joint Ownership of the Property and Applicability of Section 56(2)(x):The assessee contended that the property was purchased by his wife, and his name was added as a joint holder only for convenience. The Tribunal observed that the initial letter of allotment and subsequent agreements were in joint names, and the assessee contributed 38.38% to the payment. The Tribunal held that the assessee's claim of not being a co-owner was premature, as ownership would be determined upon the sale of the property. The Tribunal did not find merit in the assessee's argument and kept the issue open for future consideration.3. Applicability of Amended Provisions of Section 56(2)(x):The assessee argued that the amended provisions, which increased the tolerance level to 10%, should be applied retrospectively. The Tribunal agreed, citing various decisions that supported the retrospective application of the amendment. The Tribunal concluded that the difference between the agreement value and the stamp duty value was within the 10% tolerance limit, and thus, no addition should be made under section 56(2)(x).4. Applicability of Section 56(2)(x) to Rights to Acquire Immovable Property:The assessee argued that section 56(2)(x) applies only to 'immovable property' and not to rights to acquire such property. The Tribunal did not address this issue separately, as the main contention revolved around the valuation and joint ownership.5. Impact of GST Benefits on Property Valuation:The assessee claimed that the difference in valuation was due to GST benefits. The Tribunal did not specifically address this issue, as the primary focus was on the valuation and the applicability of section 56(2)(x).6. Stamp Duty Valuation for Under-Construction Properties:The assessee argued that the valuation for stamp duty purposes should consider the under-construction status of the property. The Tribunal emphasized that the valuation should be based on the date of the agreement, as per the proviso to section 56(2)(x), and not the date of registration.7. Non-Declaration of Property Ownership in Tax Returns:The assessee contended that the property was not declared in his tax returns, as it was owned by his wife. The Tribunal noted that the issue of ownership was not conclusively determined and would be addressed upon the sale of the property.8. Referral to the Department Valuation Officer for Property Valuation:The assessee argued that the valuation should have been referred to the Department Valuation Officer. The Tribunal did not find it necessary to address this issue, as it concluded that the valuation should be based on the date of the agreement and within the 10% tolerance limit.Conclusion:The Tribunal partly allowed the appeal, holding that no addition should be made under section 56(2)(x) due to the retrospective application of the 10% tolerance limit. The Tribunal kept the issue of joint ownership open for future consideration, depending on the circumstances at the time of the property's sale.