Stamp duty valuation difference and 10% tolerance band applied retrospectively, allowing taxpayer to accept consideration as full value.

Amendment introducing a tolerance band permits treating stamp duty value within 10% of agreed consideration as the fair market value for purposes of section 56(2)(x). The proviso links valuation by the stamp valuation authority and the Valuation Officer so that where stamp valuation does not exceed the consideration by more than 10%, the consideration may be accepted as full value. Courts have treated this tolerance as beneficial and applied it retrospectively to earlier transactions; accordingly the taxpayer benefited from the 10% tolerance and the appeal was allowed.

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Issues: Whether the addition of Rs. 28,66,000 made under Section 56(2)(x) of the Income-tax Act, 1961, by treating the stamp duty value as higher than the recorded consideration should be sustained in view of the DVO valuation and the applicability of the 10% tolerance band.

Analysis: Relevant statutory provisions include Section 56(2)(x) of the Income-tax Act, 1961 and the proviso providing a tolerance band (10%) analogous to the protective rule in Section 50C. The dispute concerns difference between stamp duty value and transaction consideration, the subsequent preliminary valuation furnished by the Valuation Officer, and whether the tolerance band applies to reduce or eliminate the addition. Judicial authorities have applied the beneficial tolerance rule retrospectively and have recognised that where the difference between stamp duty value and consideration does not exceed the statutory tolerance, the stamp duty value need not be treated as full value for taxation. Applying the DVO's valuation to the facts and the 10% tolerance principle leads to a reduction of the taxable difference and affects the quantum of addition under Section 56(2)(x).

Conclusion: The addition of Rs. 28,66,000 under Section 56(2)(x) is deleted and the appeal is allowed; the result is in favour of the assessee.

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