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Facts
The Revenue challenged the CIT(A)'s order deleting additions made by the AO on account of the difference in stamp duty value for a property purchase and for a slum sale of an undertaking. The AO had made additions under Section 56(2)(x) of the Income Tax Act, 1961. The assessee argued that the property acquisition was a leasehold right, not a transfer of ownership, and that the slum sale value should not be considered for individual assets.
Held
The Tribunal upheld the CIT(A)'s decision. For the property purchase, the Tribunal found no infirmity in deleting the addition as the proviso to Section 56(2)(x)(b)(B) allowed for the stamp duty value as on the date of agreement. For the slum sale, the Tribunal also found no infirmity in the CIT(A)'s deletion as Section 56(2)(x) was not applicable to the transaction, relying on various judicial precedents.
Key Issues
Whether the difference in stamp duty value for property acquisition and slum sale consideration is taxable under Section 56(2)(x) of the Income Tax Act, 1961.
Sections Cited
56(2)(x), 50C, 143(2), 142(1), 143(3), 143(3A), 143(3B), 2(14)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the Revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19.
The Revenue has challenged the ld. CIT(A)’s order deleting the addition of Rs.19,64,304/- made by the ld. Assessing Officer ('A.O.' for short) u/s. 56(2)(x) of the Act as ‘income from other sources’ on account of difference in the stamp duty value received on sale of immovable property and on the deletion of addition of Rs.3,12,00,000/-, aggregating to Rs.3,31,64,304/- u/s. 56(2)(x) of the Act along with the other related grounds.
exporter of readymade garments since 2014 and the sole proprietor of M/s. True Fashion.
The assessee is also said to be a partner in the partnership firm of M/s. S. K. International Exports Co. which was also into the business of manufacturing and exporting of ladies garments since 2003. The assessee then retired from partnership firm on 31.03.2013. The assessee during the year under consideration had e-filed his return of income on 30.10.2018, declaring total income at Rs.48,30,780/- as ‘income from business’. The assessee’s case was selected for limited scrutiny under CASS for the reason that purchase value of the property was less than the value as per the stamp authority. Notice u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee.
After duly considering the assessee’s submission, the ld. A.O. passed the assessment order on 09.04.2021 u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act, thereby determining the total income at Rs.3,79,95,084/-, after making the addition on the difference in the value of the properties purchased by the assessee with that of the value as per stamp authority aggregating to Rs.3,31,64,304/-.
Aggrieved the assessee was in appeal before the ld. CIT(A) who vide order dated 19.04.2024 allowed the appeal of the assessee on various grounds.
The Revenue is in appeal before us, challenging the impugned order.
The learned Departmental Representative ('ld.DR' for short) for the Revenue relied on the order of the ld. A.O. and contended that the assessee has failed to comply with the provisions of section 56(2)(x) of the Act.
The learned Authorised Representative ('ld. AR' for short) for the assessee contended that ground no. 1 raised by the Revenue on addition of Rs.19,64,304/- pertains hold rights from the vendor and the same is not a transfer of ownership. The ld. AR further stated that the said transactions is evidenced from the ‘agreement to sell’ dated 09.01.2012 from the allottee for a consideration of Rs.43,85,904/- in which case the developer of the said property had executed a sub lease deed dated 22.01.2018 transferring the title along with the possession to the assessee. The ld. AR further relied on the allotment letter issued by the developer to the assessee dated 24.02.2012 for the purpose of sub leasing the said property to the assessee. The ld. AR stated that the assessee has also paid a stamp duty of Rs.3,32,500/- for the said transfer. The ld. AR relied on the ld. CIT(A)’s order.
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee had entered into an ‘agreement to sell’ pertaining to the property situated in Noida vide a deed dated 09.01.2012, as per which the assessee acquired a ‘right to purchase/acquire a property’ in lease hold property of a residential premises from the lawful allottee as per the said agreement for a consideration of Rs.43,85,904/- along with any additional charges, if any, to the developer. Pursuant to this, the developer issued an amended allotment letter to the assessee dated 24.02.2012 and executed a sub lease deed dated 22.01.2018, thereby transferring the right/title/interest in the residential premises along with peaceful possession to the assessee. The assessee had also paid a stamp duty of Rs.3,34,500/-, thereby capitalizing the sale consideration and the stamp duty paid for the residential premises where the aggregate total purchase value amounts to Rs.47,20,404/-. The assessee’s contention that the said property was an under construction property which was evidenced by the property’ in January, 2012 itself. The assessee contends that a right to acquire a property is a ‘capital asset’ as per the definition of section 2(14) of the Act and relied on the following decisions :
230 ITR 864 (Bom) Bafna Charitable Trust vs. CIT 122 ITR 594 (Bom) CIT vs. Tata Services Ltd. 90 ITD 44 (Mum-Trib) ACIT vs. Smt. Hansaben B. Mehta 287 ITR 142 (Pune-ITAT) Smt. Nargis K. Irani vs. ITO
The ld. A.O. invoked section 56(2)(vii)(b) in his first draft assessment order dated 15.02.2021 and, subsequently invoked section 56(2)(x)(b)(B) of the Act in the second draft assessment order dated 05.03.2021, as the former section was not in operation w.e.f.
01.04.2017, for the reason that the assessee had registered the said property only on 22.01.2018. The ld. CIT(A), on the other hand, held that as the date of ‘agreement to sell’ is 09.01.2012 and the allotment letter has also been furnished to the assessee on 24.02.2012, where the assessee has also paid the full and final consideration to the developer/builder, which fact was also not disputed by the ld. A.O., the impugned addition made by the ld. A.O. on the difference in the stamp duty value, was deleted on the ground that the proviso to section 56(2)(x)(b)(B) of the Act provides that where on the date of agreement the consideration has been fixed for transfer of immovable property and when the date of agreement and date of registration are not the same, then the stamp duty value as on the date of agreement may be taken for the purpose of determination of the stamp duty value. It is also not the case of the Revenue that the assessee has not paid the consideration or failed to establish the payment for the said property at the time of ‘agreement to sell’. Though the ld. AR has extensively argued that it is the case of transfer of lease hold rights for which section 50C of the Act cannot be invoked, there is appeal. In the absence of the same, and on perusal of the relevant documentary evidence furnished by the assessee, we find no infirmity in the order of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 1 raised by the Revenue is hereby dismissed.
Ground no. 2 pertains to the addition of Rs.3,12,00,000/- as ‘income from other sources’ u/s. 56(x) of the Act on account of difference in the stamp duty value. It is observed that the assessee had acquired an undertaking (export oriented unit (EOU)) with all its assets and liabilities which includes Industrial Gala nos. 85 to 86 from M/s. SK International Export Co. as a going concern for a slum sale consideration of Rs.30 lacs vide agreement for slum sale dated 29.04.2016 w.e.f. 01.04.2016. The assessee’s contention is that the same was accounted in the books of accounts of the assessee in F.Y.
2016-17 when the said consideration was paid, though the same was registered in F.Y.
2017-18. The assessee had placed reliance on the decision of the Hon'ble Apex Court in the case of R. C. Cooper vs. Union of India [1970] 3 SCR 530 (SC) and the decision of Hon'ble Jurisdictional High Court in the case of Premier Automobiles vs. ITO [2003] 264 ITR 193 which has held that the sale of the entire undertaking as a ‘going concern’ will be a ‘slum sale’ and not acquisition of individual assets. The assessee has also relied on the decision of jurisdictional co-ordinate bench in the case of DCIT vs. Sumit Securities (SB) wherein it was held that in a slum sale, the value of individual assets should not be considered for determining the value of consideration for such transfer. The ld. CIT(A) after duly considering the submission of the assessee transaction.
Upon perusal of the factual aspects and considering the documentary evidence relied upon by the assessee, we find no infirmity in the other of the ld. CIT(A) in deleting the impugned addition made by the ld. A.O. Ground no. 2 raised by the Revenue is hereby dismissed.
Ground nos. 3 to 8 being general in nature requires no separate adjudication.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 12.11.2024.
Sd/- Sd/- (Girish Agrawal) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 12.11.2024 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai