Valuation of immovable property under tax rules: 10% tolerance applied to differential consideration, addition deleted accordingly.

Differential consideration for an immovable property was measured against the 10 percent tolerance band applied to stamp duty valuation; the tribunal treated valuation provisions governing buyer and seller as pari materia and applied the tolerance limit to the purchaser's charge under the gift/receipt valuation provision. The tribunal relied on prior authority holding that the enlarged tolerance operates from the date of introduction of the principal valuation provision, permitting retrospective application of the amendment for tolerance purposes. Because the differential fell within the 10 percent tolerance, the assessed addition was deleted and the assessee's grounds were allowed.

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Issues: (i) Whether the learned CIT(A) was justified in confirming the addition under Section 56(2)(vii)(b) of the Income-tax Act, 1961 on account of differential consideration of immovable property.

Analysis: The issue concerns application of the tolerance limit for variation between stamp duty value and stated sale consideration. The proviso prescribing a 10% tolerance band in the scheme relevant to valuation (reflected in Section 56(2)(x) and analogous to the proviso in Section 50C(1)) governs whether a differential consideration falls to be treated as income under Section 56(2)(vii)(b). The proviso providing the 10% tolerance band, though introduced later, is to be construed as effective for the comparable valuation provisions from their inception on the principle that Sections 50C and 56(2)(vii)(b) are pari materia. Applying that tolerance band to the facts, the differential of Rs. 3,32,960 is within 10% of the stated consideration and therefore does not attract addition under Section 56(2)(vii)(b).

Conclusion: The addition under Section 56(2)(vii)(b) confirmed by the CIT(A) is deleted; the appeal is allowed in favour of the assessee.

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