Query on Section 56(2)(viib) of income tax act

[mayank bohra]

Hello,

My client is an INDIVIDUAL purchased a commercial property in the FY 15-16 for which the consideration was paid in CASH and agreement done on 27.5.15. During filing of return of income for AY 16-17 (due on 17.10.2016), I have raised this point that stamp duty value of the agreement is more than actual consideration paid so difference needs to be considered as deemed income u.s 56(2)(viib).

Here the client don't mind treating difference as income as per section 56(2)(viib) and pay taxes however here is a catch.

The stamp duty value as taken in agreement (on which stamp duty is paid) is just double the actual circle rate. We don't know how the land registration department had come to value double the actual circle rate. While signing the agreement client overlooked the stamp value as taken by the department and no protest was done. In such scenario, what's the right way to proceed from income tax point of view.

Option A) don't disclose difference as deemed income u/s 56(2)(viib) while filing return of income. If thats the case whether in assessment if the differrence is treated as income, whether cost of acquisition of the property will be revised to actual consideration paid plus difference on account of deemed income now assessed ? Also what will the accounting treatment of such deemed income in normal books of accounting and in which year?

Option B) If we treat the differnece between the ACTUAL circle rate (substantiated by valuation certificate from local assessor) and consideration paid as income, than the case will for sure be selected for assessment. In such case what are the chances that the no further additions made as ACTUAL circle rate is still lessor than the stamp duty value of the agreement.

Option 3) What's the best thing to do now when we have to file the return of income for AY 16-17 due on 17.10.16.

Your replies are really appreciated. Thanking you all in advance. Regards

AI Summary

Query on Treating Stamp Duty Difference as Deemed Income Under Section 56(2)(viib) for FY 15-16 Commercial Property Purchase An individual purchased a commercial property in FY 15-16, paying in cash, with the agreement dated 27.05.15. The stamp duty value exceeded the actual consideration, prompting a query about treating the difference as deemed income under Section 56(2)(viib) of the Income Tax Act for AY 16-17. The client overlooked the inflated stamp duty value, which was double the circle rate. Options discussed include not disclosing the difference, treating it as income based on the actual circle rate, or determining the best course of action before the filing deadline. The discussion highlights the applicability of provisions when consideration is paid in cash.