ITAT Recognizes Booking Date for Valuation of Immovable Property for Income Tax

The flat was purchased by an Assessee named Harsha Rajan at a price less than its stamp duty value; thus, the difference was taxed under Section 56(2). The ITAT held that the value of the booking date should be considered, not the registration date, and deleted the addition.

FACT OF THE CASE

The assessee filed her return, where she declared an income of Rs 10,48,080 for the AY 2020–21. She had bought a flat in Mumbai for Rs 8,092,750 (value declared was Rs 8,092,750), but the stamp duty value on registration of the same was Rs 11,014,997. There was a huge difference between the two values, being Rs 2,922,247. The property was booked on 16 January 2012 and the payment of part of the consideration amount was made through the banking system on that date. The consideration was substantially determined on the date of booking of the flat; however, the sale agreement was executed on 15 January 2019 and registered on 20 April 2019. The assessee claimed that the increase in the stamp duty value was due to the long gap from the date of booking to the date of registration of the sale agreement and revision of the ready reckoner rates by the government and the stamp duty value as on the date of booking of the flat should be considered consensually. Nevertheless, based on Section 56(2)(x), the AO assessed the difference as income from other sources, and this was later affirmed by the CIT(A), resulting in the instant appeal filed before the Tribunal.

Issue:

1. Whether stamp duty value on the date of registration (i.e., in 2019) should be adopted for the purpose of section 56(2)(x).

2. Whether the stamp duty value on the booking or allotment date (i.e., in 2012) should be used for the purposes of applying section 56(2)(x) (proviso).

The Tribunal observed as follows:

The Tribunal found that, payment was made via banking channels in 2012 at the time of booking/allotment and this firmly established the consideration amount. The first proviso to section 56(2)(x) grants approval to use stamp duty value as per agreement date if payment is received prior to the date of payment of stamp duty value. Allotment letters are usually regarded as “agreements”.

Failure to apply the proviso would not satisfy the intent of the law in regard to transactions of under-construction properties.

The CIT(A) has, inappropriately, used the concept of “receipt” as a basis for his observations and not given due regard to the specific statutory relief contained in the proviso.

JUDGEMENT:

The ITAT held that:

The Assessee shall qualify for the benefit conferred by the proviso to Section 56(2)(x). The stamp duty value of the property as on the date of Booking/Allotment shall be considered. So, they took away Rs. 29.22 lakh. The appeal went in favour of the taxpayer.