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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K
O R D E R Per Padmavathy S, AM:
These cross appeals by different assessees and the revenue are against the separate orders of the Commissioner of Income Tax (Appeals)-18, Chennai [in short 'CIT(A)'] both dated 26.02.2025 for Assessment Year (AY) 2018-19 passed under section 250 of the Income Tax Act, 1961 (the Act). The issues contended by both the assessees through various grounds are as under:
(i) That the proceedings under section 153C is not valid.
3 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. (ii) That the provisions of section 56(2)(x) cannot be invoked in the case where the asset transferred is stock-in-trade. (iii) Without prejudice when the difference between the stamp duty value and the actual consideration is less than 5% then no addition can be made under section 56(2)(x).
The revenue's appeal in both the assessee pertains to the CIT(A) deleting the adjustment made by the AO towards stamp duty and registration charges against the consideration paid by the seller while making addition under section 56(2)(x) of the Act.
The assessee is a private limited company engaged in the business of infrastructure services. The assessee filed the return of income for AY 2018-19 declaring a loss of Rs. 3,65,90,652/-. The assessment was completed under section 143(3) accepting the income returned by the assessee. Subsequently, based on a search and seizure operation carried out under section 132 of the Act in the group case of Shri Ram Prasath Reddy on 27.11.2020 alleging that document found in the search process contained details of concealment of income by the assessee with respect to acquisition of immovable property from M/s Gateway Office Parks Pvt. Ltd. during the previous year 2017-18. Accordingly, the AO issued a notice under section 153C and the assessee filed the return of income declaring a loss of Rs. 3,65,90,652/-. During the course of assessment proceeding, the AO noticed that the assessee has acquired the immovable property from M/s Gateway Office Parks Pvt. Ltd. for a consideration below the stamp duty valuation and accordingly issued a notices as to why an addition under section 56(2)(x) cannot be made.
4 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd.
After considering the details furnished by the assessee. The AO treated the above difference as addition under section 56(2)(x) of the Act to the tune of Rs. 15,79,64,298/- after reducing the registration and stamp duty charges from the purchase consideration paid by the assessee. The AO also made an addition under section 40A(2)(b) for a sum of Rs. 3,42,71,250/- and also disallowed interest on TDS to the tune of Rs. 3,75,113/-. Aggrieved the assessee filed further appeal before the CIT(A). With respect to addition made under section 56(2)(x), the assessee raised the contention before the CIT(A) that if the adjustment made by the AO towards stamp duty and registration charges is deleted then the difference between the actual cost of acquisition and stamp duty value will be less than the tolerance limit of 5% as provided in section 56(2)(x) of the Act. The CIT(A) gave partial relief to the assessee towards the addition made under section 56(2)(x) by deleting the adjustment made by the AO towards stamp duty and registration charges. However, the CIT(A) did not accept the contention of the assessee with regard to the difference being within the tolerance limit for the reason that the tolerance limit cannot be applied retrospectively. Further the CIT(A) deleted the addition made towards 40A(2)(b) of the Act and confirmed the disallowance of interest on TDS. The assessee and the revenue are in appeal against the order of the CIT(A).
The ld. AR argued that the tolerance limit introduced in section 56(2)(x) it is retrospective in nature and therefore should be applied in assessee's case for AY 2018-19. The ld. AR in this regard relied on the decision of Mumbai Bench of the Tribunal in the case of Gaurav Investments vs. DCIT (ITA No. 5184/Mum/2024 dated 29.04.2025). The ld. AR also argued that the asset purchased by the assessee is stock-in-trade and therefore the provisions of section 56(2)(x) are not applicable. The ld. AR in this regard took us through the provisions where the term 'property' is 5 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. defined to submit that the definition is applicable only to 'capital asset' and not stock-in-trade.
The ld. AR on the other hand submitted that section 29 of the Stamp Duty Act provides that in the absence of an agreement to the contrary the stamp duty is to be born by the buyer at the time of purchase and that in the present case the stamp duty was agreed to be born by the seller. The ld. AR further submitted that in the given case the assessee has paid the consideration as per the Sale-deed and that the stamp duty and registration cost which is besides the consideration is agreed to be borne by the seller instead of the buyer. The ld. AR also submitted that the payment of stamp duty by the seller does not reduce the liability of the buyer i.e. assessee who is required to pay the entire consideration towards acquisition and therefore it is the consideration paid by the assessee that needs to be considered for the purpose of section 56(2)(x). The ld. AR argued that there is no provision under the Act to reduce the stamp duty value or registration charges from the consideration paid towards acquisition of the property.
7. The ld. DR on the other hand argued that the tolerance limit of 5% was introduced only from 01.04.2019 and therefore the same cannot be applied to assessee's case in AY 2018-19. The ld DR with regard to the relief given by the CIT(A) towards stamp duty and registration charges argued that when the obligation of the buyer is met by the seller, then the AO has correctly reduced the same from the actual consideration towards acquisition of the property.
8. We heard the parties and perused the material on record. Before considering the issue of retrospective applicability of stamp duty valuation, it is pertinent consider whether for the purpose of computing the tolerance percentage, whether the stamp duty and registration charges paid by the seller should be reduced from 6 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. the consideration need to be examined. Therefore we first proceed to adjudicate the revenue's appeal. During the proceedings under section 153C, the AO noticed that the assessee has bought a property for a consideration which is below the stamp duty valuation. The AO further noticed that the stamp duty and registration charges towards the purchase are paid by the seller and not the buyer. The AO also noticed that the seller at the time of acquiring the property had born the stamp duty. Therefore the AO was of the view that the seller bearing the stamp duty both at the time of purchase and sale does not seem like a prudent commercial transaction and is a self-serving interest taking place between related parties. Accordingly the AO reduced the stamp duty and registration charges paid by the seller from the consideration paid by the assessee for the purpose making the addition under section 56(2)(x) of the Act. The CIT(A) while deleting the adjustment made by the AO held that – “5.3.2 Working out the differential value between the guideline value and actual consideration paid by the appellant as above, the AO has reduced the registration charges and stamp duty borne by the seller from the overall consideration paid by the purchaser in respect of the above two properties. As per the AO, since the registration and stamp duty were borne by the seller, this effectively reduces the cost of the asset in the hands of the purchaser. However, this reduction of stamp duty and registration charges from the actual consideration paid is not in order since cost of acquisition in the hands of appellant in respect of these lands is Rs.69,62,63,040/- and Rs.68,92,06,320/- respectively, which would otherwise have been Rs. 75,19,64,083/- and Rs. 76,50,19,015/- respectively, had the seller not borne these two charges. As was contended by the appellant in ground No.6.4.1, the registration and stamp duty borne by the seller is beyond the scope of the provisions of section 56(2)(x), since the provisions speak of 'consideration' in the hands of the purchaser. In the case on hand, the appellant paid Rs.69,62,63,040/- and Rs.68,92,06,320/- as consideration for purchase of the lands against the guideline value of Rs.72,27,13,600/- and Rs.68,92,06,320/-. Therefore, the amounts paid to the seller are the consideration paid for the purpose of acquisition of land and reduction of stamp duty and registration charges borne by the seller from the consideration so paid is not in order. Since Section 56(2) (x) is a deeming provision, one cannot expand the meaning of scope of any word while interpreting such deeming provision 7 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. and accordingly the consideration actually paid by the purchaser has to be considered as such and no other parameters such as reducing the stamp duty and registration charges from the actual consideration so paid, as was worked out by the AO in the above table, is permissible. Therefore, the amounts of purchase value arrived at Rs.64,05,61,997/- and Rs.61,33,93,625/- respectively by the AO is not proper and so also the difference of Rs. 15,79,64,298/- as differential value for the purpose of section 56(2)(x).”
9. From the perusal of the AO's finding with regard to the impugned transaction of acquisition of the property by the assessee. We notice that the AO has questioned the logic behind the seller bearing the stamp duty and registration charges and that it is done for inter-commercial expediency and a self-serving interest taking place between related parties. The AO further held that the assessee would claim the deduction towards stamp duty and registration charges at the time of selling the property which would amount to double deduction for the reason that the seller would have paid capital gains only on the actual consideration received from the assessee. However, in our considered view the reasons as quoted by the AO are not the valid basis for reducing the stamp duty and registration charges from the consideration paid by the assessee towards acquisition of the property. We further notice that the assessee has paid the consideration as per the Sale-deed which fact has not been disputed by the AO. Therefore the reduction of consideration paid by the assessee stating that the stamp duty and registration paid by the seller effectively reduces the cost in the hands of the purchaser does not have any valid base and not tenable. For the purpose of section 56(2)(x), the consideration in our view is the actual cost paid by the buyer towards acquisition of the property and there is no provision under said section for any adjustment towards stamp duty and registration charges born by the seller instead of the buyer. Accordingly, we see no infirmity in the decision of the CIT(A) in directing the AO not to reduce stamp duty and registration charges from the actual consideration paid by the assessee towards acquisition of the property.
8 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd.
Now coming to assessee's appeal, we notice that the CIT(A), has rejected the applicability of 5% tolerance limit for the reason that the same is not applicable for the year under consideration i.e.AY 2018-19. In this regard we notice further that the Mumbai Bench of the Tribunal in the case of Gaurav Investments (supra) has considered an identical issue of retrospective applicability of tolerance limit in the context of section 50C and 43CA and held that "9. We heard the parties and perused the material on record. The AO has received the information from Stamp duty authorities that during the year under consideration, the assessee has sold two properties for a consideration less than the stamp duty valuation. The AO called on the assessee to show cause as to why the provisions of section 43CA cannot be applied to make the addition towards the difference between the stamp duty value and sale consideration. Therefore before proceeding further we will look at the provisions of section 43CA which read as under – 43CA. - Special provision for full value of consideration for transfer of assets other than capital assets in certain cases. (1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than 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 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 computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer: Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and ten 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 computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration: 61[Provided further that in case of transfer of an asset, being a residential unit, the provisions of this proviso shall have the effect as if for the words "one hundred and ten per cent", the words "one hundred and twenty per cent" had been substituted, if the following conditions are satisfied, namely:— (i) the transfer of such residential unit takes place during the period beginning from the 12th day of November, 2020 and ending on the 30th day of June, 2021;
9 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. (ii) such transfer is by way of first time allotment of the residential unit to any person; and (iii) the consideration received or accruing as a result of such transfer does not exceed two crore rupees.] (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).
(3) & (4) ****
10. The plain reading of the above provisions makes it clear that if the stamp duty value is higher than the sale consideration received on sale of a property (other than capital asset) then the income from the sale of the said property shall be considered at stamp duty valuation. The proviso which was introduced by the Finance Act 2018, provided that if the difference is not more than 5% then the actual sale consideration will be treated as the income. In other words no addition will be made, if the difference is within the tolerance band of 5%. The said 5% was increased to 10% by Finance Act, 2020 w.e.f. 01.04.2020. The contention of the assessee before the AO is that the tolerance band of 5% / 10% should be applied in assessee's case and therefore no addition can be made under section 43CA of the Act. The AO did not accept the said claim of the assessee and held that the introduction of tolerance band in section 43CA of the Act is prospective and the CIT(A) upheld the said view of the AO. However the CIT(A) gave relief to the extent by considering the value of the property as certified by the DVO.
11. In the light of these facts the limited issue for our consideration is whether the tolerance band introduced under section 43CA of the Act i.e. 5% w.e.f. 01.04.2019 and 10% w.e.f. 01.04.2021 are applicable to assessee's case for AY 2017-18. In this regard we notice that the Co-ordinate Bench of the Tribunal in the case of Macrotech Developers Ltd. (supra) has considered a similar issue where it has been held that – “037. Ground number 4 of the appeal is with respect to the addition of Rs 2,03,051/- by invoking the provisions of section 43CA of the act. During the year, the assessee has sold a commercial property to a customer for the sale consideration of Rs.47,500,000. The stamp duty value of the flat as determined by the stamp duty authority is 47,703,051/- which exceeded the value of the sale consideration by Rs.203,051. Thus, the difference between the sale consideration and stamp duty value is merely 0.43% The learned assessing officer has made the addition of the above sum by invoking the provisions of 10 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. section 43CA of the act. This was also upheld by the learned dispute resolution panel.
The learned authorized representative submitted that first proviso to section 43CA (1) of the act states that where the difference between the sale consideration and value adopted for the purpose of stamp duty does not exceed 110% of the sale consideration, the deeming provisions of this section will not apply and the actual sale consideration will be considered for the purpose of calculation of the profit. Prior to 1 April 2021, the proviso provided tolerance band of 105% of the sale consideration it was submitted that the enhancement of the tolerance band should apply retrospectively as it is amended to remove the genuine hardship faced by the stakeholders and therefore it should be applied retrospectively. The assessee relied upon several judicial precedents. Accordingly, it was argued that the addition requires to be deleted.
The learned departmental representative supported the orders of the lower authorities and submitted that such tolerance bench should not be applied retrospectively. The learned departmental representative referred to the historical background of provisions of section 43CA of the act and submitted that earlier it did not apply to transfer of immovable property held as stock in trade and for curbing the use of unaccounted money by parties involving in transfer of immovable property where the stock in trade is sold the above provisions were included. He relied upon the decision of the honourable Bombay High Court in case of principal Commissioner of income tax versus Swanand properties private limited (2019) 111 taxmann.com 94, the decision of the honourable allowable High Court where retrospective operation of rule 6AA was held to be prospective in case of CIT versus Rajasthan Charm Kal Kendra (2005) 144 taxman 320 and decision of the coordinate bench in welfare properties private limited versus deputy Commissioner of income tax 180 ITD 591 wherein it has been held that prior to incorporation of proviso to section 43CA (1) with effect from 1/4/2019, there was not on rent Limited envisaged in section 43CA regarding difference between stamp duty value and actual sale consideration received by assessee on transfer of asset and therefore, the benefit of tolerance limit is not available to the assessee in view of these decisions.
The learned authorized representative vehemently opposed the submission of learned departmental representative and referred to page number 21 of the assessment order wherein assessee specifically
11 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. objected to the above addition before the learned assessing officer submitting that that there can be several reasons for the difference such as shape of the plot, location et cetera and therefore, the learned AO should have referred the matter to the valuation officer. Even otherwise, he submitted that the several judicial precedents have held that it is retrospective in nature. He further referred to the central board of direct taxes Circular number 8 of 2018 dated 26/12/2018 wherein the tolerance band of 5% was provided which is enhanced to 10% with effect from 1/4/2021. He therefore submitted that there is no reason why assessee should not be given a benefit of the above tolerance band.
We have carefully considered the rival contention and perused the orders of the lower authorities.
We find that identical issue arose before the coordinate bench in case of Sai Bhargavanath Infra v Assistant Commissioner of Income- tax [2022] 144 taxmann.com 168 (Pune Trib.) For assessment year 2015-16 wherein it has been held that- “4. We observe from plain reading of sec. 43CA that it provides in a case where consideration received or accruing as a result of the transfer by an assessee of an asset other than the capital asset being land or building is lesser than the value adopted or assessed by any Government authority for the purpose of payment of stamp duty then the difference will taxed as deemed income. At the same time, the proviso to this section states that if there is a difference of such value within 10% margin then there cannot be any addition on the pretext of deemed income and this 10% margin has been inserted by Finance Act, 2020 w.e.f. 1-4-2021. The assessment year under consideration before us is A.Y. 2015-16 that is prior to the date when the amendment look place and such 10% margin was inserted. The question therefore, arises whether this amendment effective from 1-4-2021 can even apply to prior assessment years as well. The assessee had relied on Pune Tribunal decision in (supra) where the Tribunal has given retrospective effect in regard to section 43CA first proviso where the tolerance margin of 10% has been held to be applicable even for the prior assessment years. However, in this decision, reliance was placed on another decision of Bombay Tribunal in the case of Maria Fernandes Cheryl v. ITO (International Taxation) [2021] 123 taxmann.com 252/187 ITD 738 (Mum) which relates to section 50C of the Act. It was contended that section 43CA and section 50C of the Act are pari materia provisions and therefore, holding of 12 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. retrospective application of section 50C is even applicable making retrospective application to section 43CA of the Act as well. The Id. A.R was unable to place on record before us any direct decision where the first proviso of section 43CA which has been brought into effect from 1- 4-2021 was held to be applicable retrospectively. In such scenario, we place reliance on the doctrine enshrined in the judgment of the full bench decision of Hon'ble Supreme Court in the case of CIT v. Vatika Township (P) Ltd. [2014] 49 taxmann.com 249/227 Taxman 121/367 ITR 466. The fact in this case was that search and seizure u/s 132 was conducted on 10-2-2001 pursuant to which the assessment order for the block period from 1-4-1989 to 10-2-2000 was passed on 28-02-2002 at a total undisclosed income of Rs. 85,00,000/-. The tax was charged as prescribed in section 113 of the Act. Subsequently, a proviso was inserted u/s 113 by the Finance Act, 2002 w.e.f. 01-06-2002 to provide for levy of surcharge at 10%. The A.O took the view that the said amendment was clarificatory in nature and he levied surcharge by passing rectification order u/s 154 of the Act. However, the Tribunal and the Hon'ble High Court upheld the assessee's claim that the said amendment was prospective in nature and did not apply to block period falling before 01-06-2002. However, the plea of the assessee was rejected by the Hon'ble Supreme Court in CIT v. Suresh N. Gupta [2008] 166 Taxman 313/297 ITR 322 also held that the proviso to section 113 is clarificatory and hence, should be read into block assessment scheme under Chapter XIV-B with retrospective effect. Similar view was reiterated by the Hon'ble Supreme Court in CIT v. Rajiv Bhatara (2009) 178 Taxman 285/310 ITR 105 by holding the proviso u/s 113 to be retrospective in nature. Then the Supreme Court was of the view that the issue ought to be referred to a larger Bench of Five Judges. In this decision, the Hon'ble Supreme Court has given fundamental doctrine of retrospective applicability of provision. It has been held that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in terms of the Act or arises by necessary and distinct implication. The assessment creates a vested right on the assessee. The assessee cannot be subjected to re-assessment unless the provision to that effect is inserted by amendment either retrospectively or by necessary implications retrospectively. The Hon'ble Apex Court also opined that there cannot be any imposition of tax without the authority of law and such law has to be unambiguous and should prescribe liability to pay taxes in clear terms. This very principle is based on the doctrine, which means that if a particular provision of statute is not clear regarding imposition of tax or because of persons from whom the tax has to be collected, in such case the persons should not be fastened with any liability to pay tax. It
13 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. was further observed that though the Chief Commissioner in their Conference suggested that there should be retrospective amendment to section 113 of the Act, the Legislature chose not to do so even though for other provisions in which the legislature in its wisdom felt the need to do so has brought in amendments made with retrospective effect. The CBDT circular No. 2002 dated 27-08-2002 also makes it clear that the amendment to section 113 is prospective. Consequently, the conclusion reached in N. Suresh Gupta (supra) treating the proviso to section 113 of the Act as clarificatory and having retrospective effect was held to be incorrect and was over-ruled.
5-6. The essence of the decision is that if any liability has to be fastened with the assessee tax-payer retrospectively then the statute and the provision must spell out specifically regarding such retrospective applicability. However, if the provision is beneficial for the assessee, in view of the welfare legislation spirit imbibed in the Income-tax Act, such beneficial provision can be applied in a retrospective manner. In the case of the assessee before us for the preceding assessment year i.e. A.Y. 2014-15, the difference of the consideration received from transfer of asset and the value adopted for stamp duty valuation was apparently not less than 10% tolerance margin which has been brought into effect from 1-4-2021 in the first proviso to section 43CA and therefore, the Tribunal in its wisdom had restored the matter to the file of the A.O for fresh adjudication (supra). Before us, admittedly such difference of tolerance margin is less than 10%. Now the question of applicability of this proviso of section 43CA retrospectively covering the assessment year in question i.e. A.Y. 2015-16, from the spirit of Supreme Court decision in Vatika Township (P.) Ltd. (supra) case is analysed. Now, the intent of the legislature is to provide relief to the assessee in case such difference is less than 10% which has been brought into effect from 1-04-2021 thereby providing benefit to the assessee. This being the beneficial provision therefore will even have retrospective effect and would apply to the present assessment year 2015-16. At this juncture we would also refer to the decision of Pune Tribunal in Dinar Umeshkumar More v. ITO [IT Appeal No. 1503 (Pune) of 2015, dated 25-1-2019], where the said proposition of applicability of a beneficial provision was considered in light of Hon'ble Apex Court decision in the case of Vatika Township (P) Ltd. (supra). In the said Tribunal order, the Bench observed that if the legislature is going to confer a benefit then such an averment will have a retrospective effect. The Tribunal observed that while discussing this issue in para 33 of the said judgment, the Hon'ble Apex Court held that "We would also like to point out, for the sake of completeness, that where a benefit is conferred
14 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. by legislation, the rule against a retrospective construction is different. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect". The net effect of this judgment is that if a fresh benefit is provided by the Parliament in an existing provision, then such an amendment should be given retrospective effect. Therefore, even without going into the merits of the case by the application of first proviso to section 43CA having retrospective effect, the grounds of appeal of the assessee stands allowed."
Therefore, the above decision of the coordinate bench clearly clinches the issue in favour of the assessee wherein it has been held that tolerance band of 10% would be applicable retrospectively. We also find that similar view has also been taken in i. SHRI HARISH H GANDHI VERSUS ACIT 33 (1), MUMBAI And ii. V.K. DEVELOPERS VERSUS THE ACIT, CIRCLE-3, PUNE. ITA No.923/PUN/2019 iii. M/S. SHETH DEVELOPERS PRIVATE LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4 (2), MUMBAI AND (VICE-VERSA) TA No. 1953/Mum/2020 And And ITA No.11/Mum/2021 And ITA No. 12/Mum/2021 iv. M/S. CITY CORPORATION LIMITED, (EARLIER KNOWN AS M/S. AMANORA FUTURE TOWERS PVT. LTD.,) VERSUS DCIT, CIRCLE- 1 (1) PUNE AND VICE VERSA (2022) 96 ITR
We find that the decision of the coordinate bench in case of welfare properties private limited versus DCIT (supra) did not consider the retrospective applicability of the tolerance band provided under section 43CA of the act same was not the issue argued before it.
The decision of the honourable Bombay High Court in case of 111 taxmann.com 94 in case of Swanand properties private limited was only with respect to applicability of provisions of section 43CA of the act for assessment year 2005-06 wherein it has been held that this provisions
15 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. are applicable only with effect from 1/4/2014. Therefore, it does not help the case of the revenue.
Accordingly we hold that if the difference between the stamp duty value of a stock in trade and the transaction value covered by the provisions of section 43CA is less than 10% even prior to 1/4/2021, does not warrant any addition in the hands of the assessee. Accordingly, we direct the learned assessing officer to delete the addition of Rs. 203,051/- made under section 43CA of the act. Ground umber 4 of the appeal of the assessee is allowed.”
From the perusal of the above decision, it is noticed that the coordinate bench has held that the proviso to section 43CA providing relief to the assessee to the extent of the difference being less than 10% is applicable retrospectively for the reason that it is a beneficial provision as has been held by the Hon'ble Supreme Court in the case Vatika Township Pvt. Ltd. (supra). It is relevant to notice here that the coordinate bench has distinguished the decision relied on by the ld DR in the case of welfare properties private limited (supra). We further notice that a similar view has been held by the Co-ordinate Bench in other cases which are relied on by the ld. AR as listed in the earlier part of this order.
We also notice that the coordinate bench in the case of Maria Fernandes Cheryl vs ITO(IT) [2021] 123 taxmann.com 252 (Mumbai - Trib.) in the context of section 50C has elaborated the legislative intent of introducing the tolerance band and held that the amendment providing the tolerance band is retrospective in nature and relates back to the date of insertion of statutory section to the Act. The relevant extract of the observations made by the coordinate bench are extracted here under –
…………………….. The insertion of the third proviso to Section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of Section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bonafide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an 16 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of Section 50C(1) was thus relaxed, and very thoughtfully so, to take these bonafide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to Section 50C(1) is in the nature of a remedial measure to address a bonafide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 17 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked.
Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested that we may mention in our order that "relief is being provided as a special case and this decision may not be considered as a precedent". Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of "equality before the law," which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea of the assessee.
We have noted that as against the stated consideration of Rs. 75,00,000, the stamp duty valuation of the property is Rs. 79,91,500. The difference is just Rs. 4,91,500, which is about 6.55% of the stated sale consideration. As the difference between the stated consideration vis-à-vis the stamp duty valuation is admittedly less than 10% of the stated consideration in this case, and in the light of the above discussions, we are of the considered view that section 50C
18 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. will have no application in the matter. The enhancement in capital gain computation, as made by the Assessing Officer, thus stands disapproved. The assessee gets the relief accordingly. (emphasis supplied) 14. The ratio laid down in the above decision is that the rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application. In our considered view the same analogy would apply to the provisions of Section 43CA of the Act also since both the sections are similarly worded with the difference being that section 50C is applicable in case of transfer of capital asset being land or building or both and section 43CA is for the transfer of asset (other than capital asset) being land or building or both. We further notice that in Circular 8 of 2018 dated 26.12.2018 containing Explanatory Notes to the provisions of Finance Act 2018 in Para 16 for ‘Rationalization of Sections 43CA and 50C’ it is stated that the proviso containing the tolerance band is inserted in order to minimize hardship in case of genuine transactions in the real estate sector. When the reason behind the introduction of the proviso is read with the ratio laid down by the judicial precedence as discussed here in above on the retrospective applicability of beneficial provision, we have no hesitation in holding that the tolerance band of 10% is applicable in assessee's case for AY 2017-18. In assessee's case the difference between the DVO valuation that is considered for making addition under section 43CA and the sale consideration is less than the tolerance band as per the proviso to the said section (refer table extracted in the earlier part of this order). Accordingly we hold that in assessee's case no addition under section 43CA of the Act is warranted for the year under consideration. "
The ratio laid down by the Co-ordinate Bench in the above case is that the tolerance limit introduced in section 50C and 43CA are curative in nature and therefore the same is to be applied retrospectively. In our considered view a similar analogy should be applied to Section 56(2)(x) for the same reason that that the amendment to the said section is also clarificatory / curative in nature. Therefore we have no hesitation in holding that the ratio in the above decision is applicable to assessee's case also. Accordingly in assessee's case the AO is directed to delete the addition made under section 56(2)(x) taking into consideration the tolerance limit of 5% as prescribed.
19 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. 12. Since we have allowed the claim of the assessee with regard to retrospective applicability of tolerance limit, the other contentions of the assessee with respect to applicability of section 56(2)(x) to asset held as stock-in-trade and on the legal contention with regard to section 153C have become academic and are left open accordingly.
13. From the perusal of the grounds raised by the assessee and the revenue in the above appeal, we notice that the contentions are identical to the facts in & 1283/Chny/2025. We further notice that the grounds on which the claim of the assessee with respect to applicability of tolerance limit and the CIT(A) deleting the AO's action towards reducing stamp duty and registration charges from the consideration paid by the assessee are identical. Therefore we are of the view that our decision in and 1283/Chny/2025 is mutatis mutandis applicable to the present appeal also. Accordingly we hold that there is no infirmity in the order of the CIT(A) in deleting the adjustment made by the AO towards stamp duty and registration charges. We further hold that the applicability of tolerance limit is retrospective since its curative in nature and accordingly the addition made under section 56(2)(x) will not survive for the reason that the difference between the actual consideration paid by the assessee and the stamp duty valuation is less than 5%.
Since we have allowed the claim of the assessee with regard to retrospective applicability of tolerance limit, the other contentions of the assessee with respect to applicability of section 56(2)(x) to asset held as stock-in-trade and on the legal contention with regard to section 153C have become academic and are left open accordingly.
20 ITA 1172-1273-1173-1283/Chny/2025 SPL Shelters Pvt. Ltd. and Sriprop Properties Pvt. Ltd. 15. In result, appeal of both the assessees in & 1173/Chny/2025 are allowed and the appeal of the revenue in & 1283/Chny/2025 are dismissed.
Order pronounced in the open court on 25-07-2025.