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Income Tax Appellate Tribunal, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
1. This appeal by the revenue is preferred against the order of the ld. CIT(A) - 49, Mumbai [hereinafter “the ld. CIT(A)”] dated 31/01/2025 pertaining to AY 2014-15.
2. The grievance of the revenue reads as under:- “1. "On facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of Rs. 76,66,066/- made by the Assessing Officer, which was related to the excess interest claimed by the assessee under Section 24(b) of the Income Tax Act and the interest claimed was not exclusively linked to the loan utilized for the acquisition of the 19th-floor property, which is let out.
"On facts and circumstances of the case and in law, the learned CIT(A) failed to consider the fact that the assessee's claim for interest of Rs. 4,84,25,447/-under Section 24(b) was in excess by Rs. 76,66,066/-. The assessee only provided valid evidence for interest payments amounting to Rs. 4,07,59,381/-with respect to loans from Union Bank of India and State Bank of India, which were exclusively used for acquiring the 19th-floor property and Interest payments on loans for the 18th-floor flat and other properties cannot be claimed under this section in relation to the 19th- floor flat."
3. "On facts and circumstances of the case and in law, the learned CIT(A) incorrectly allowed the excess claim of Rs. 76,66,066/- in violation of the provisions of Section. 24b1 which specifically restricts interest deductions to self-occupied property. The interest paid on loans for properties other than the let-out I9th-floor property should not have been considered for deduction under Section 24(b)."
4. "On facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 3,26,58,000/- made by the Assessing Officer, which was added to the total income of the assessee under the head "Income from Other Sources" on account of the difference between the stamp duty value and the agreement value of the property purchased by the assessee."
"On facts and circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the provisions of Section 56(2)(vii)(b)(i) of the Income Tax Act, 1961, which mandates the taxation of the difference between the stamp duty value and the actual consideration in the case of transfer of property. The provisions clearly state that if the consideration for transfer is less than the stamp duty value, the difference should be treated as income in the hands of the recipient under the head “income from Other Sources”.
6. "On facts and circumstances of the case and in law, the Learned CIT(A) failed to take into account the amendment to Section 56(2)(vii)(b)(ii) w.e.f. 1st April 2021, which further clarified the scope of the provisions relating to the taxation of the difference between the stamp duty value and the actual consideration, particularly in cases involving specified transactions. The addition of Rs. 3,26,58,000/- is in line with the statutory provisions and should have been upheld.
7. “On facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 3,26,58,000/- made by the Assessing Officer without considering the fact that the assessee’s Authorized Representative (AR) failed to provide any between the stamp duty value and the actual consideration paid for the flat, despite being given an opportunity to do so.
8. The appellant craves leave to add to alter, amend, modify and/or delete any or all of the above said grounds of appeal. The appellant reserves its right to file further submission in the appeal.”
Briefly stated the facts of the case are that the assessee filed his return of income on 30/11/2014 declaring total income at Rs. 3 2,32,03,440/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and serve upon the assessee.
During the course of scrutiny assessment proceedings, the AO noticed that the assessee has let out its house property at 19th Floor in Lodha Costeria, Mumbai. The property was bought out of the borrowed funds and the interest paid thereon has been claimed as deduction u/s 24(b) of the Act. The assessee was asked to furnish the necessary details which were supplied to the AO. The assessee filed the statement/certificates issued by the banks along with a statement showing the utilization of funds against the premises. After perusing the details, the AO was of the opinion that the interest claimed u/s 24(b) of the Act does not wholly pertain to the loans taken for acquiring the 19th floor which was let out. The AO was also of the opinion that only the loans taken from SBI & UBI are for the 19th Floor. The AO found that the loan of Rs. 5,00,00,000/- obtained from Bank of Baroda has been used for acquiring Flat No. 1703 & 1704 in Lodha Costerja. The AO on his belief considered the interest paid for housing loan from UBI & SBI totaling to Rs. 4,07,59,381/- as allowable deduction and interest paid on the loan taken from Bank of Baroda of Rs. 76,66,066/- was disallowed. 4.1. Proceeding further, the AO found that the assessee has purchased flat at 18th Floor in Lodha Costerja and on perusal of the details, the AO found that the agreement value of the property is Rs. 40,50,00,000/- whereas the stamp duty value u/s 50C is Rs. 43,76,58,000/-. The AO accordingly added Rs.3,26,58,000/- u/s 56(2)(vii)(ii) of the Act.
4 5. The assessee challenged both the additions before the ld. CIT(A) and reiterated its claim of interest on borrowed funds and pointed out that the difference in the stamp duty value and the agreement value is less than 10% and, therefore, no addition needs to be made. After considering the facts and submissions and after carefully perusing the details, the ld. CIT(A) found that the Flat at 18th Floor was a bare shell property and was not in the condition to be let out and, therefore, the agreement value of the flat has to be taken as Nil. 5.1. The ld. CIT(A) further found that subsequently the said flat was rented out and the assessee has earned rental income of Rs. 33,00,000/- for the period January to March, 2014 and thereafter from April, 2014 till March, 2015, the assessee has earned rental income at Rs. 1,32,00,000/-. The ld. CIT(A) was convinced that since the assessee has shown rental income of Rs. 33,00,000/- for the year under consideration, the assessee is very much entitled for the claim of deduction of interest paid on borrowed loan from Bank of Baroda and deleted the addition of Rs. 76,66,066/-. 5.2. Insofar as the addition on account of difference in the stamp duty value and the agreement value is concerned, the ld. CIT(A) was convinced that since difference is less than 10%, the matter is covered by several judicial pronouncements wherein it has been held that the amendment to Section 56 of the Act is curative in nature and can be applied retrospectively.
Before us, the ld. D/R strongly supported the findings of the AO and read the operative part of the assessment order. Per contra the ld. 5 Counsel for the assessee reiterated what has been stated before the lower authorities.
We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee has borrowed loan from SBI, UBI & Bank of Baroda. The loans taken from SBI & UBI are coming from earlier years and fresh loan is from Bank of Baroda. It is also not in dispute that the loan taken from Bank of Baroda has been utilised for the purchase of Flat at 18th Floor of Lodha Costerja. It is also not in dispute that the assessee has shown rental income of Rs. 33,00,000/- for the period January, 2014 to March, 2014. Since the assessee has shown rental income, then the assessee is very much entitled for the claim of deduction of interest u/s 24(b) of the Act. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is accordingly dismissed.
Insofar as, the addition u/s 56(2)(vii)(ii) of the Act is concerned, the undisputed fact is that the difference between the agreement value and stamp value is much less than 10%. Therefore, the decision of the Co-ordinate Bench in the case of Joseph Mudaliar vs. DCIT [2021] 130 taxmann.com 250 (Mumbai-Trib.), squarely applies. The relevant findings read as under:- “9. Before dealing with the substantive issue, it is necessary to look into the relevant statutory provisions. By the Finance (No.2) Act, 2009 section 50C was introduced in the statute with effect from 1-4-2010. As per the provision of section 50C(1) of the Act, where the consideration received on sale of an immovable asset by an assessee is less than the value determined by the stamp valuation authority, the value so determined would be deemed to be the full value of consideration received or accruing as a result of such transfer, for computing capital gain. By Finance Act, 2018, the third proviso to section 50C(1) of the Act was introduced to the statute with effect from 1-4-2019, which reads as under:- '50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : ** ** ** ** ** ** Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.' 10. Unlike section 50C of the Act, there was no corresponding provision in the Act vesting the assessing authority with power to adopt the stamp duty value as deemed sale consideration in respect of the buyer of the immovable property. However, by Finance Act, 2013, a new sub clause (b) was introduced to section 56(2)(vii) with effect from 1-4-2014, which reads as under:- "(b) any immovable property,- (i) Without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: ** ** **"
As could be seen from section 56(2)(vii)(b)(ii), it empowers the assessing officer to treat the excess value determined by the stamp duty authority over and above the declared sale consideration as the deemed sale consideration and add it as income at the hands of the person buying the property. Thus, by the aforesaid provision, a buyer of the property was also brought at par with the seller of the property as per section 50C(1) of the Act. Prima facie, section 56(vii)(b)(ii) would get triggered once the stamp duty authority determines the value of a property in excess of the declared sale consideration. However, the crucial issue which needs to be considered is, whether the third proviso to section 50C(1) of the Act providing exception in case the difference in value is less than 10%, would be applicable to section 56(2)(vii)(b)(ii) of the Act. In this context, the argument of the learned departmental representative is, firstly, there is no provision like third proviso to section 50C(1) of the Act in section 56(2)(vii)(b)(ii) of the Act and secondly, even if there is one, it will apply prospectively.
As could be seen, section 56(2)(vii) in its original form was introduced by Finance Act, 2009 with effect from 1-10-2009. However, by Finance Act, 2017 it was provided that section 56(2)(vii)(2) would be applicable in respect of the specified transaction undertaken between 1st day of October, 2009 and before 1st day of April, 2017. This amendment was effective from 1-4-2017. Simultaneously with the aforesaid amendment made to section 56(2)(vii), the Finance Act, 2017 also introduced clause (x) to section 56(2) to bring within its ambit the transactions referred to in section 56(2)(vii) undertaken after 1st day of April, 2017. Clause (x) of section 56(2) was subsequently amended by Finance Act, 2018 with effect from 1- 4-2019 and again by Finance Act, 2020 with effect from 1-4-2021. The relevant part of section 56(2) which is required for our purpose is extracted hereunder:- "(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,— (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,— (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; 69[(B) for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to five per cent of the consideration:] ** ** **"
Thus, as can be seen, after introduction of section 56(2)(x), applicable for transactions undertaken after 1-4-2017, by Finance Act, 2018, identical exception as provided in third proviso to section 50C(1) is also provided in sub clause (b)(B)(ii) from 1-4-2019. Interestingly, section 43CA introduced to the statute by Finance Act, 2013 with effect from 1-4-2014 also provide for adoption of the value determined by the stamp valuation authority if it is in excess of the declared sale consideration of an immovable property. However, this provision is applicable to an asset other than a capital asset. It will be further interesting to note, in the first proviso to section 43CA(1) of the Act which was introduced by Finance Act, 2018 with effect from 1- 4-2019, similar exception as provided in third proviso to section 50C(1) and section 56(2)(x)(b)(B)(ii) of the Act was introduced. It will be further relevant to observe, by the Finance Act2020, the permissible limit of variation in the value has been enhanced to ten per cent from five per cent. Of course, in case of section 43CA further benefit has been granted to the assessee by enhancing the limit of variation to 20%.
On a conjoint reading of sections 50C, 43CA and 56(2)(x) of the Act, the legislative intention becomes absolutely clear that wherever the statute provides for adoption of the value determined by the stamp valuation authority as the deemed sale consideration, in case, it exceeds declared sale consideration, exceptions have also been provided not to adopt the market value if the difference between the value declared by the assessee and determined by the stamp duty authority is within a permissible limit.
The reason for not providing such an exception in section 56(2)(vii)(b)(ii) is patent and obvious. As could be seen, the amendments to sections 50C, 56(2)(x) and 43CA providing for exception in case of marginal difference between the declared sale consideration and value determined by the stamp valuation authority were introduced to the statute by Finance Act, 2018 with effect from 1-4-2019. Meaning thereby, the legislature did not felt the necessity of introducing such an exception to section 56(2)(vii)(b)(ii) simply for the reason that such provision was applicable for a period between 1st October, 2009 to 1st April, 2017. Therefore, non-introduction of similar exception to section 56(2)(vii(b)(ii) cannot be held against the assessee. Rather, section 56(2)(vii)(b)(ii) has to be harmoniously construed along with sections 50C, 56(2)(x) and 43CA and the exceptions provided in the later three provisions have to be read into section 56(2)(vii)(b)(ii) to provide true meaning to the intention of the legislature. This, according to us, clearly answers submissions of learned departmental representative regarding absence of a provision identical to third proviso to section 50C(1) in section 56(2)(vii)(b)(ii).
Thus, in our considered opinion, the assessee would be eligible to get the benefit of ten per cent margin difference in the valuation between the value determined by the stamp duty authority and the declared sale consideration. Thus, if the variation between the aforesaid two values falls within the range of ten per cent, no addition can be made.
It is further relevant to observe, section 50C or for that matter section 56(2)(vii)(b)(ii) are identical provisions. Only difference being, 50C is applicable to the seller of an immovable property, whereas, the later provision is applicable to the buyer of the property. Therefore, a benefit given to a seller of the property in respect of marginal variation cannot be denied to the buyer of the property, since, they stand on the same footing. This aspect of the issue has also been considered by the co- ordinate bench in case of Shri Sandip Patil v. ITO (supra), wherein, the co-ordinate bench has held that there cannot be two different fair market value in respect of the very same property, i.e. one at the hands of the seller and the other at the hands of the buyer. Thus, in our view, if the difference in valuation between the value determined by the stamp duty authority and the declared sale consideration is less than 10%, no addition can be made under section 56(2)(vii)(b)(ii) of the Act.
Having held so, the second aspect of the issue which requires consideration is whether the exception to section 50C(1) by way of third proviso and section 56(2)(x)(b)(B) would apply prospectively or retrospectively. The issue is no more res integra in view of a number of decisions of different benches of the Tribunal. The Tribunal has consistently expressed the view that since the aforesaid amendments made by Finance Act, 2018 with effect from 1-4-2019 are curative in nature and beneficial provisions, it would apply retrospectively. In this context, we get support from the following decisions:-
Sandip Patil (supra) 2. Maria Fernandes Cheryl (supra) 19. Thus, keeping in view the discussions hereinabove, we delete the addition of Rs. 23,30,694/-. This ground is allowed.” 9. Similar view was taken by the Chennai Bench in the case of Thiduvil Balakrishnan vs. DCIT [2023] 151 taxmann.com 484 (Chennai- Trib.). The relevant findings read as under:- “10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per the provisions of section 56(2)(vii)(c) of the Act, if difference between consideration paid for purchase of property and guideline value of said property, then said difference should be treated as income of the assessee for the relevant assessment year. In this case, there is no dispute with regard to the fact that there is a difference between guideline value of the property and consideration paid for purchase of said property, because the registration authority has levied an additional stamp duty of Rs. 66,000/- while registering the property. The AO has made addition of Rs. 8,25,000/- being difference between guideline value and consideration paid for purchase of property. Therefore, we are of the considered view that there is no error in the reasons given by the AO to make additions towards difference in value of property u/s. 56(2)(vii)(c) of the Act. 11. As regards alternate plea of the assessee that, the difference between guideline value and consideration paid for property is less than the tolerance band fixed by virtue of amendment to section 50C by the Finance Act, 2020 and thus, no addition can be made u/s. 56(2)(vii)(c) of the Act, we find that, the amendment brought to section 50C by the Finance Act, 2018 and further amendment by Finance Act, 2020 is held to be retrospective in nature, as held by ITAT, Mumbai in the case of Maria Fernandes Cheryl v. ITO (International Taxation) [2021] 123 taxmann.com 252/187 ITD 738. We, therefore of the considered view that by virtue of said amendment to section 50C of the Act, if difference between guideline value and consideration paid for purchase of property is less than the tolerance band, then said difference cannot be considered as deemed consideration in the hands of the seller and consequently the provisions of section 56(2)(vii)(c) of the Act cannot be invoked in the hands of the buyer. Since, difference between guideline value and consideration paid for purchase of property in the present case is less than tolerance band, we are of the considered view that no addition can be made u/s. 56(2)(vii)(c) of the Act. Thus, we direct the AO to delete addition made towards difference in value of property u/s. 56(2)(vii)(c) of the Act.”
Respectfully following the decision of the Co-ordinate Bench (supra), we do not find any reason to interfere with the findings of the ld. CIT(A). This Ground is also dismissed.