Flat allotment letter fixing sale price and part payment vs higher stamp value on registration; s.56(2)(vii)(b) addition deleted.

The dominant issue was whether an addition under s.56(2)(vii)(b) could be made by adopting the stamp duty value as on the registration date, despite an earlier allotment letter fixing consideration. The ITAT held that the allotment letter, containing agreed terms, identified the specific flat, fixed the consideration and payment schedule, and was enforceable under s.10 of the Contract Act; further, part payment was made by account payee cheque on or before the allotment date, satisfying the provisos permitting adoption of stamp value as on the agreement date. Consequently, the difference between registration-date stamp value and stated consideration was not taxable, and the addition was deleted.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, for the purpose of section 56(2)(vii)(b)/56(2)(x), an allotment letter fixing consideration and containing payment terms can be treated as the "agreement" contemplated in the proviso for adopting stamp duty value as on the agreement date (where registration occurs later).

(ii) Whether the assessee satisfied the proviso conditions-particularly, payment of part consideration by a mode other than cash on or before the agreement date-so as to require adoption of stamp duty value as on the allotment/agreement date and thereby negate any addition based on the stamp duty value as on registration date.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Allotment letter as "agreement" under the proviso

Legal framework (as discussed): The Court examined the proviso to section 56(2)(vii)(b)/56(2)(x), which provides that where the date of the agreement fixing consideration and the date of registration are not the same, the stamp duty value as on the agreement date may be taken, subject to the condition that consideration (or part thereof) is paid by a mode other than cash on or before the agreement date.

Interpretation and reasoning: The Court found that the allotment letter recorded identification of the specific flat, fixed the lump-sum consideration, and stipulated a construction-linked payment schedule. It conferred exclusivity in favour of the assessee for the identified flat and was treated as enforceable because both sides had agreed to its terms and the assessee acted upon it by making payments. The Court further reasoned that the allotment letter contained essential terms and satisfied the elements of a valid contract, and therefore qualified as an "agreement" for purposes of the proviso.

Conclusion: The allotment letter was held to be an "agreement" fixing consideration within the meaning of the proviso, notwithstanding that a registered sale deed was executed later.

Issue (ii): Satisfaction of proviso conditions and sustainability of addition

Legal framework (as discussed): The proviso requires (a) an agreement fixing consideration prior to registration, and (b) payment of consideration (or part) by non-cash mode on or before the agreement date, enabling adoption of stamp duty value as on the agreement date to mitigate hardship from time-gap driven increases in stamp values.

Interpretation and reasoning: On the evidence (including bank statements), the Court recorded that part payments were made through cheque to the builder in relation to the booking/allotment and prior to the registered instrument. It held that these facts fulfilled the proviso requirements. Since the proviso applied, the basis adopted for addition-comparing consideration in the registered instrument with stamp duty value as on the later registration date-was not warranted on these facts.

Conclusion: The conditions of the proviso were held to be satisfied; consequently, the addition made under section 56(2)(vii)(b) on the difference between the consideration and the stamp duty value taken as on registration date was deleted, and the assessee's grounds were allowed.

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