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Facts
The revenue appealed against an order deleting additions made by the AO. The dispute centered on the validity and timing of an MoU for property purchase versus a registered agreement for sale and conveyance deed, and whether Section 56(2)(viib) applied. The AO had made additions based on the difference between the stamp duty value and the purchase price, considering the property was acquired below its Fair Market Value (FMV).
Held
The Tribunal found that the unregistered MoU, dated 14/01/2013, was prepared subsequent to the registered agreement for sale dated 08/07/2013, and the deed of conveyance dated 15/07/2014. Since Section 56(2)(viib) was inserted with effect from 01/04/2014, it was applicable from AY 2014-15. The CIT(A) had erred in its interpretation by applying it to the earlier MoU.
Key Issues
Whether the provisions of Section 56(2)(viib) of the Income Tax Act, 1961, are applicable to the transaction when the initial MoU was dated prior to the insertion of the section, but the registered sale agreement and conveyance deed were executed after its insertion.
Sections Cited
Section 56(2)(viib), Section 2(47)
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Income Tax Appellate Tribunal, E BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the revenue is preferred against the order dated 31/05/2024 passed by NFAC, Delhi pertaining to AY 2016-17. 2. The solitary grievance of the revenue is that the ld. CIT(A) erred in deleting the additions made by the AO accepting the MoU which was un-registered and cannot be held as a valid document. The Id. CIT(A) further erred in not appreciating the agreement for sale dated 08/07/2013 wherein it is mentioned clearly that the purchase shall be completed upon permissions from the competent authorities and on execution and registration of conveyance deed. Therefore, the provisions of Section 56(2)(viib) of the Act squarely apply.
The representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidence brought on record duly considered.
Briefly stated, the facts of the case are that the assessee electronically filed return of income on 31/10/2015 declaring income of Rs.24,47,540/-. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee.
During the course of scrutiny assessment proceedings, the AO noticed that the assessee has purchased a property situated at Kohoj- Khuntawali vide registered document dated 17/07/2014 for a consideration of Rs.75,00,000/-. The AO further found that the stamp duty authority has valued the stamp duty value of the said property at Rs.2,79,45,000/-. The AO was of the opinion that the provisions of Section 56(2)(viib) of the Act, squarely apply and sought explanation from the assessee. 4.1. 1. In his reply, the assessee submitted the copy of conveyance deed dated 17/07/2014 and submitted that the said property was purchased in the capacity of partner of M/s. Rohan Construction. However, no supporting documentary evidences were furnished. Thereafter, the assessee submitted that the said land was acquired under Sathe Karar on 08/07/2013. It was strongly contended that the stamp duty authority has ascertained its value on higher side considering that the said property was subject to various encroachments and defects. Since the assessee requested to refer the case to DVO, the AO referred it to the DVO, Thane, who determined the fair market value (FMV) of the property at Rs. 2,57,04,000/-. After receiving the report of the DVO, the AO was of the opinion that since the assessee has purchased the property below its FMV, provisions of Section 56(2)(viib) of the Act applies and applying the same, the AO made addition of Rs. 1,82,04,000/-.
The assessee challenged the addition before the Ild. CIT(A) and strongly contended that the sale agreement was executed on 08/07/2013 which falls in FY 2013-14 pertaining to AY 2014-15 when the provisions of Section 56(2)(viib) of the Act was not in the statute. The ld. CIT(A) was convinced with the non-application of the provisions of Section 56(2)(viib) of the Act and deleted the additions.
Before us, the Id. D/R strongly contended that the MoU is an unregistered document and, therefore, does not have much evidentiary value. Further as per the agreement to sale, the purchase shall be completed upon getting sale permission from the competent authority under the provisions of Bombay Tenancy and Agricultural Lands Act, 1948, after permission u/s 43 and on execution and registration of the conveyance deed at the efforts of the vendor and at the cost and expenses of purchaser. This registered agreement is dated 08/07/2013. Even DVO's report is also based upon this registered document dated 08/07/2013 which falls in FY 2013-14 pertaining to AY 2014-15. 7. On the other hand, the Id. Counsel submitted that the assessee came into possession of the said property by virtue of the MoU dated 14/01/2013 which is evident from the possession/occupation receipt appended to the MoU which also shows that the vendors have received Rs.2 Lakhs by way of cheque and have categorically mentioned that physical possession/occupation of the said land is given to the assessee. Thus, as per Section 2(47) of the Act, transfer has been completed.
We have heard rival contentions and given a thoughtful consideration to the orders of the authorities below.
The undisputed fact is that the entire case of the assessee revolves around the fact that as per the MoU dated 14/01/2013, the assessee was given the possession of the impugned land and, therefore, as per the provisions of Section 2(47) of the Act, transfer has taken place. It is also not in dispute that this MoU is an unregistered document. It is also an admitted fact that the agreement for sale was executed on 08/07/2013, which is registered document followed by deed of conveyance dated 15/07/2014. Agreement for sale dated 08/07/2013 being a registered document has more evidentiary value than an unregistered MoU. Further a perusal of the agreement for sale shows that there is not even a whisper of the MoU. It is customary to refer to all the previous documents/agreements entered before the agreement for sale. The deed of conveyance dated 15/07/2014 has reference to the agreement of sale dated 08/07/2013 but again no reference to the MoU. Even under the payment schedule, there is no mention of Rs. 2 Lakhs paid as per the MoU.
These clinching facts lead to a logical conclusion that the MoU has been prepared subsequent to the agreement for sale and deed of conveyance because the Act has been amended w.e.f. 01/04/2014 when provisions of Section 56(2)(viib) of the Act has been inserted and it is trite law that provisions are applicable on the first date of the assessment year unless otherwise provided. Since the Finance Act, 2013 has inserted Section 56(2)(viib) of the Act w.e.f 01/04/2014, which means that the provision is applicable from AY 2014-15 and is, therefore, applicable for the year under consideration.
We find that the ld. First Appellate Authority has mis-interpreted the relevant provisions of the Act while giving relief and, therefore, fell into error. The findings of the Id. CIT(A) are hereby reversed and that of the AO is restored. The addition is confirmed.
In the result, appeal of the revenue is allowed. Order pronounced in the Court on 24th October, 2024 at Mumbai. (SANDEEP SINGH KARHAIL) JUDICIAL MEMBER Mumbai, Dated 24/10/2024 आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to: 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. संबंधित आयकर आयुक्त / Concerned Pr. CIT 4. आयकर आयुक्त (अपील)/ The CIT(A)- 5. विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण, मुंबई / DR, ITAT, Mumbai, 6. गार्ड फाई/ Guard file. आदेशानुसार / BY ORDER,