2025 (10) TMI 764 - AT - Income Tax

Stamp duty value fixed by earlier agreement; valuation date is agreement/booking date; excess taxed under s.56(2)(vii)(b)

ITAT MUMBAI allowed the appeal, holding that where an earlier agreement fixed consideration and part payment was made before registration by a non-cash ... Addition u/s 56(2)(vii)(b) - difference of stamp duty and agreement value on account of purchase of property - whether the stamp duty valuation has to be taken as on the date of booking of the flat and part payment made by the assessee or at the time of final registration of the purchased document? - HELD THAT:- As per clause (b) of sub-section (2)(vii), if the assessee has received immovable property for a consideration which is less than the stamp duty value, the value of such property as exceeds such consideration shall be chargeable to income tax under the head income from other sources. The first and second proviso carve out the exception for taking stamp duty value on the date of agreement prior to the date of registration if an amount of consideration or part thereof has been paid by any mode other than the cash before the date of agreement for transfer of such immovable property. Therefore, if there is an agreement between the parties, fixing the amount of consideration for transfer of immovable property prior to the date of registration and the purchaser has made the payment of consideration or part thereof before the date of that registered agreement for transfer by any mode other than cash then the value as determined for the stamp duty will be taken on the date of such earlier agreement. In the case in hand, all these facts are duly acknowledged by the parties in the registered agreement that earlier there was a booking of flat and the assessee paid part payment of consideration. Hence, the proviso first and second to section 56(2)(vii) of the Act would be applicable in the case and the stamp duty valuation or the fair market value of the immovable property shall be considered as on the date of booking and payment made by the assessee towards booking of the flat. Accordingly, the orders of the authorities below are set aside and the matter is remanded to the record of the AO to apply the stamp duty valuation as on 18/10/2010 when the assessee booked the flat and made part payment of consideration and consequently, if any difference in the stamp duty valuation is higher than the purchase consideration paid by the assessee, the same would be added to the income of the assessee under the provisions of section 56(2)(vii)(b) of the Act. Appeal of assessee allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the excess of stamp duty value over agreement consideration in purchase of an immovable property is chargeable to tax under section 56(2)(vii)(b) where the stamp duty value at registration exceeds the recorded sale consideration. 2. Whether the stamp duty value for the purpose of section 56(2)(vii)(b) must be taken as at the date of registration or may be taken as at an earlier date of agreement/booking where (a) an earlier booking/agreement is demonstrated and (b) part payment (other than cash) was made on or before that earlier date. 3. Whether documentary evidence of booking/part payments and subsequent registered agreement that records the earlier booking and payment schedule suffice to treat the earlier booking date as the date of agreement for application of the provisos to section 56(2)(vii)(b). 4. Whether non-receipt of completion certificate/occupancy certificate affects the applicability of stamp duty valuation date under section 56(2)(vii)(b) when registration occurs later. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Chargeability under section 56(2)(vii)(b) where stamp duty value exceeds consideration Legal framework: Section 56(2)(vii)(b) taxes where immovable property is received for consideration which is less than stamp duty value by more than Rs.50,000; the stamp duty value in excess of such consideration is chargeable as income from other sources. The provision contains provisos allowing the stamp duty value on the date of an earlier agreement to be taken where (i) the date of agreement and date of registration differ and (ii) amount or part thereof has been paid by non-cash mode on or before the date of that agreement. Precedent treatment: Authorities below applied section 56(2)(vii)(b) by comparing stamp duty value at registration with recorded consideration and made addition of the difference. Interpretation and reasoning: The Tribunal acknowledged that, prima facie, where stamp duty valuation at registration exceeds the contract consideration, section 56(2)(vii)(b) applies and the excess is taxable. The Court accepted the Assessing Officer's statutory basis for making an addition where the statutory conditions are otherwise satisfied; however, applicability of provisos can change the relevant date for stamp duty valuation. Ratio vs. Obiter: Ratio - the section operates to charge the excess of stamp duty value over consideration unless an earlier agreement date (satisfying provisos) fixes the relevant stamp duty value. Conclusions: The excess between stamp duty valuation and consideration is chargeable under section 56(2)(vii)(b) unless the provisos operate to shift the relevant date to an earlier agreement date. Issue 2 - Date for computing stamp duty value: registration date v. earlier agreement/booking date Legal framework: The first proviso to section 56(2)(vii)(b) permits taking the stamp duty value on the date of the agreement fixing consideration where that date and the registration date differ; the second proviso conditions this on payment (or part payment) being made on or before the date of that agreement by a mode other than cash. Precedent treatment: Lower authorities used the registration date stamp duty valuation because the executed registered agreement recorded a lower consideration than the stamp duty valuation at registration and no earlier executed agreement was placed on record. Interpretation and reasoning: The Tribunal carefully analysed the statutory provisos and the factual matrix. It found that the registered agreement itself acknowledged an earlier booking and part payments made on specified earlier dates; the registered agreement incorporated the payment schedule and terms that were operative from the booking date. Documentary evidence before the authorities included bankers' cheques/receipts dated 18/10/2010 and 23/10/2010 and a builder's letter confirming booking and total cost. The Tribunal held that where (i) parties at registration expressly acknowledge an earlier booking and payment history, and (ii) part payment was made by non-cash mode prior to that earlier date, the provisos permit use of the earlier date's stamp duty valuation for section 56(2)(vii)(b) purposes. Hence, the Tribunal concluded that the stamp duty valuation as on the booking date (18/10/2010) should be applied rather than the valuation at registration. Ratio vs. Obiter: Ratio - where a registered agreement records an antecedent booking and part payments by non-cash modes on or before the earlier date, the provisos to section 56(2)(vii)(b) permit taking the stamp duty value on that earlier booking/agreement date for computing any charge under the provision. Conclusions: The Tribunal set aside the lower authorities' reliance on the registration date valuation and remanded for application of stamp duty valuation as on the booking date (18/10/2010), since factual documentary evidence established booking and part payment prior to registration satisfying the provisos. Issue 3 - Sufficiency of documentary evidence (booking letter, receipts, part payments) to treat booking as agreement for proviso purposes Legal framework: The provisos require an agreement fixing consideration prior to registration and pre-agreement payment by non-cash mode (part or whole) to allow the earlier stamp duty date to apply. Precedent treatment: Assessing Officer relied on absence of a separate written agreement at the time of initial payment and therefore treated registration date as operative; appellate authority similarly rejected invocation of the earlier date. Interpretation and reasoning: The Tribunal examined the registered agreement's own recitals, the builder's contemporaneous acknowledgment of booking and amount, and cheques/receipts evidencing part payments. It reasoned that the registered agreement incorporated terms and the payment schedule reflecting parties' initial commitment at booking. Consequently, even if no separate earlier formal agreement was executed, the composite of (i) booking acknowledgement, (ii) non-cash part payments, and (iii) the registered agreement's recording of those earlier events and terms sufficed to treat the booking date as the effective date of agreement for proviso application. Ratio vs. Obiter: Ratio - contemporaneous documentary evidence of booking plus non-cash part payments and incorporation of those terms in a later registered agreement can satisfy the proviso requirement that an earlier agreement fixing consideration exist for taking stamp duty value as at that earlier date. Conclusions: The documentary record (builder's letter, receipts, and payment cheques) coupled with the registered agreement's terms established an earlier agreement/booking date; therefore the provisos are applicable and the stamp duty value on the booking date must be used. Issue 4 - Effect of non-receipt of completion/occupancy certificate on stamp duty valuation date Legal framework: Section 56(2)(vii)(b) and its provisos govern which date's stamp duty value is to be used; no express provision conditions applicability on receipt of completion/occupancy certificate. Precedent treatment: The appellate authority had rejected the assessee's contention that stamp duty value should be adjusted for non-receipt of completion/occupancy certificate; the Tribunal accepted that the statutory scheme fixes the stamp duty value by reference to the operative date (agreement or registration) rather than completion/occupancy certificate status. Interpretation and reasoning: The Tribunal observed that the law requires use of the stamp duty valuation as at the relevant date (agreement or registration) and does not mandate adjustment based on completion/occupancy certificate status for the purpose of section 56(2)(vii)(b). Ratio vs. Obiter: Ratio - non-receipt of completion/occupancy certificate does not, by itself, alter the date for taking stamp duty valuation under section 56(2)(vii)(b); the statutory provisos govern that determination. Conclusions: The contention for adjustment of stamp duty value on account of non-receipt of completion/occupancy certificate was rejected as not relevant to fixing the date for valuation under section 56(2)(vii)(b). Disposition/Relief The Tribunal allowed the appeal, set aside the orders of authorities below to the extent they applied stamp duty valuation at registration, and remanded to the Assessing Officer to apply stamp duty valuation as on the booking/agreement date (18/10/2010). If, after applying that earlier stamp duty valuation, any excess remains (i.e., stamp duty value still exceeds consideration), it is to be added under section 56(2)(vii)(b).