Tolerance band for stamp duty value difference bars addition under section 56(2)(vii)(b) for immovable property transfers.

The Tribunal held that the deeming substitution of stamp duty value could not be invoked under section 56(2)(vii)(b) where the difference between the declared consideration and the stamp duty value of immovable property remained within the permissible tolerance band. Applying a harmonious reading of sections 50C, 43CA and 56(2)(x), it accepted that the legislative tolerance for marginal variation extends to section 56(2)(vii)(b). The addition was therefore unsustainable and was deleted.

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Issues: Whether the addition made under section 56(2)(vii)(b) of the Income-tax Act, 1961 on account of the difference between the purchase consideration of an immovable property and its stamp duty value could be sustained when the variation was within the permissible tolerance band.

Analysis: The difference between the agreement value and the stamp duty value was approximately 7.41%, which fell within the 10% tolerance band recognised by the legislature in comparable provisions relating to immovable property transactions. The Tribunal applied a harmonious construction of sections 50C, 43CA and 56(2)(x) of the Income-tax Act, 1961 and followed the view that the benefit of the tolerance band is available even for section 56(2)(vii)(b). The deeming fiction for substitution of stamp duty value was held not to operate where the variation remained within the prescribed limit.

Conclusion: The addition under section 56(2)(vii)(b) was unsustainable and was directed to be deleted.

Ratio Decidendi: Where the difference between the declared consideration and the stamp duty value of immovable property falls within the prescribed tolerance limit, the deeming provision cannot be invoked to tax the marginal variation.

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