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Income Tax Appellate Tribunal, MUMBAI BENCH “ SMC”, MUMBAI
PER VIKASH AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘ the CIT(A)’ ] dated 15/09/2021, for Assessment Year 2018-19.
The sole grievance of the assessee in appeal is against addition of Rs.8,67,266/- u/s. 56(2)(x) of the Income Tax Act, 1961 [in short ‘the Act’].
Shri Deepak Tralshawala appearing on behalf of the assessee narrating the facts of the case submitted, that the assessee along with her mother Mrs.Hemakshi Girish Pathak purchased a residential flat No.402 , 4th Floor, A-1 Wing Madhuban Building at Ketki Pada, Dahisar (East) Mumbai for a total consideration of Rs.31.25 lacs. The assessee and her mother has share in the said property in the ratio of 70:30. The assessee paid Rs.21,87,500/- towards her share of consideration and the remaining amount of Rs.9,37,500/- was paid by assessee’s mother. The assessee and her mother had purchased the said property from Falsa Constructions in April 2014. Allotment letter dated 24/04/2014 of the Flat was in joint name. In the allotment letter distinct number of the flat, area of the flat and the total consideration was specifically mentioned. The registered agreement for sale was executed on 11/10/2017. The Assessing Officer scrutiny assessment proceeding for Assessment Year 2018-19 invoked the provisions of section 56(2)(x) of the Act and made addition of Rs.8,67,266/- being 70% of the difference between the stamp duty value and the consideration amount shown by the assessee. Aggrieved by the assessment order dated 10/03/2021 the assessee field appeal before the CIT(A). The CIT(A) vide impugned order dismissed the appeal of assessee and upheld the addition.
3.1 The ld. Authorized Representative for the assessee submits that the assessee had purchased immovable property jointly with her mother vide letter of allotment dated 24/04/2014 i.e. prior to insertion of clause –(x) to section 56(2) vide Finance Act,2017 w.e.f 01/04/2017. The clause (x) to section 56(2) was not in existence when the assessee had acquired the property on 24/04/2014, therefore, section 56(2)(x) cannot be applied retrospectively. The letter of allotment confers right in the property and is a document binding on both the sides. Payment of installment and subsequent registration of agreement are the modalities to give effect to letter of allotment. The ld. Authorized Representative for the assessee in support of his submission placed reliance on the following decisions.
(i) ACIT vs. Keyur Hemant Shah, 199 TTJ (Mum) 388
(ii) PCIT vs. Vembu Vaidyanathan, 413 ITR 248 (Bom)
The ld. Authorized Representative for the assessee further placed reliance on CBDT Circular No.471 dated 15/10/1986 and Circular No.672 dated 16/12/1993 to contend that letter of allotment should be considered as date of acquisition of property.
3.2 The ld. Authorized Representative for the assessee further pointed that in the case of co-owner, the Revenue has accepted the cost of consideration as mentioned in the allotment letter. The ld. Authorized Representative for the assessee has drawn our attention to the assessment order dated 31/03/2021 passed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act for Assessment Year 2018-19 in the case of Mrs.Hemakshi Girish Pathak.
Per contra, Shri Suresh Periasamy representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submits that in the first instance letter of allotment does not give right of ownership to the assessee. Therefore, it cannot be said that the property was received by the assessee at the time of issuance of allotment letter. The ld. Departmental Representative further referred to the letter of allotment to contend that the expression used in the letter of allotment is “shall”. This clearly indicate that allotment of flat is a future event. Further, supporting the impugned order the ld. Departmental Representative pointed that the assessee had initially paid Rs.4.00 lacs only. Substantial payment was made after letter of allotment. Therefore, it cannot be said that the assessee had acquired ownership of the flat at the time of issuance of allotment letter.
We have heard the submissions made by rival sides and have examined the orders of authorities below. The solitary issue in appeal is against the addition of Rs.8,67,226/- made u/s. 56(2)(x) of the Act. The assessee along with her mother purchased a flat in April, 2014. The allotment letter dated 24/04/2014 was handed over to the assessee by the builder at the time of purchase of flat (the same is at page 14 of the paper book). A perusal of the allotment letter shows that Flat number, area of the flat and total consideration for purchase of flat is categorically mentioned therein. At the time of purchase of flat, the co-owner and the assessee jointly paid Rs.4.00 lacs. This fact has also been acknowledged in the allotment letter. The remaining amount of consideration was paid by the assessee over the period of time and the registered agreement for sale was executed in the joint names of assessee and her mother on 11/10/2017.
The issue in narrow encompass before us is, Whether the date of allotment letter or the date of execution of registered agreement is to be considered for determining value of flat. According to the Assessing Officer the value of immovable property on the date of registration of agreement is relevant. He thus, made addition of the difference in stamp duty value and consideration paid by assessee as per allotment letter.
One of the contention of Revenue is that allotment letter does not confer right of ownership on the assessee. Here we would like to refer to the decision of Hon'ble Bombay High Court in the case of PCIT vs. Vembu Vaidyanathan (supra). The question before the Hon'ble Jurisdictional High Court for consideration was: "Whether on the facts and in the circumstances of the case and in "law, the Income- tax Appellate Tribunal was justified in treating the gain arising from the sale of capital asset as long-term capital gains without appreciating the fact that mere letter of allotment does not lead to creation of proper and effective right over the capital asset sought to be acquired, but only on execution of an agreement spelling out all the exact terms and conditions for acquisition?
The Hon’ble High Court answered the question as under:
“It can thus be seen that the entire issue was clarified by the Central Board of Direct Taxes in its abovementioned two circulars dated October 15,1986 and December 16,1993. In terms of such clarifications, the date of allotment would be the date on which the purchaser of a residential unit can be stated to have acquired the property. There is nothing on record to suggest that the allotment in construction scheme promised by the builder in the present case was materially different from the terms of allotment and construction by the Delhi Development Authority. In that view of the matter, the Commissioner of Income Tax (Appeals), or the Tribunal correctly held that the assessee had acquired the property in question on December 31, 2004 on which the allotment letter was issued.”
The Hon’ble Court after taking cognizance of the CBDT Circular No.471 dated 15/10/1986 and Circular No.672 dated 16/12/1993 observed that the allottee gets title to the property on the issue of allotment letter and the payments of installments was only follow up action and taking delivery of the possession is only a formality. Though the circular No.471 (supra) was in particular context of flats constructed by Delhi Development Authority (DDA) on behalf of the allottees under Self Financing Scheme, the subsequent circular No.672 extended the benefit to allotment of flats, houses by Co-operative Societies and other institutions whose scheme of allotment and construction are similar to those of DDA. The Hon’ble High Court in an unambiguous terms has held that the letter of allotment confers right of ownership on the allottee.
In the instant case, after examination of allotment letter it is evident that allotment letter is irrevocable and details of the property and total consideration for purchase of the flat has been unequivocally mentioned. Thus, there is no ambiguity with regard to identification of the property and the purchase price. A perusal of the registered agreement at pages 16 to 36 of the paper book shows that the property in respect of which registered agreement has been executed is same as mentioned in the allotment letter and purchase consideration is also the same as was settled at the time of allotment. The said agreement also gives schedule of payment of installments. Thus, the terms and conditions of the agreement are akin to the scheme referred to in CBDT Circular(supra). The decision rendered in the case of Vembu Vaidyanathan (supra) squarely applies to the facts of present case.
The assessee has also brought to our notice that the Revenue has accepted the value of property as per letter of allotment in the case of co- owner. A copy of assessment order dated 31/03/2021 for assessment year 2018-19 in the case of co-owner has been placed on record. Thus, on the parity of facts no addition in the hands of the assessee could have been made.
In the light of our above findings, we hold that for the purpose of determining value of Flat where the date of allotment and the date of registration are different, the value as on date of issuance of allotment letter is relevant for determining Stamp Duty Valuation. Hence, no addition u/s.56(2)(x) of the Act is warranted in the instant case. 11. In the result, impugned order is set-aside and appeal by the assessee is allowed.