Tolerance band for stamp duty valuation increased and applied retrospectively as curative, excluding deemed-gift additions where difference is within tolerance.

Finance Act 2020 raised the tolerance band for differences between consideration and stamp duty valuation to 10%, and that amendment is characterised as a curative, retrospective measure addressing hardships from the anti-avoidance deeming provision concerning undervalued immovable property; as a result, where the difference between actual consideration and stamp duty value falls within the 10% tolerance band the deeming provision treating excess as a deemed gift under income-tax does not apply, and additions made solely on that ground are unsustainable and must be deleted.

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Issues: Whether the amendment by Finance Act, 2020 increasing the tolerance band to 10% for differences between actual consideration and stamp duty value is curative and retrospective such that no addition under Section 56(2)(x) of the Income-tax Act, 1961 is required where the difference is less than 10% of the consideration in Assessment Year 2017-18.

Analysis: Finance Act, 2020 raised the tolerance band for variations between stated consideration and stamp duty valuation to 10% for immovable property and that amendment addresses unintended hardships arising from deeming provisions concerning undervaluation. Prior tribunal decisions have treated the enhancement of the tolerance band as curative in nature and applicable retrospectively to the date when the related deeming provision took effect. On the facts of the appeal the difference between the actual consideration paid and the stamp duty value falls below the 10% tolerance band; accordingly, the anti-avoidance deeming provision under Section 56(2)(x) does not apply in these circumstances.

Conclusion: The amendment increasing the tolerance band to 10% is to be treated as curative and retrospective; since the difference is less than 10% of the consideration, the addition under Section 56(2)(x) is not sustainable and is deleted. The appeal is allowed in favour of the assessee.

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