NEXZONE FISCAL SERVICES PRIVATE LIMITED ,MUMBAI vs. ACIT, NATIONAL E-ASSESSMENT CENTRE, DELHI, ACIT, NATIONAL E-ASSESSMENT CENTRE, DELHI

PDF · subscribers
ITA 4730/MUM/2023Status: DisposedITAT Mumbai27 June 2024AY 2018-20197 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 7,86,760/- was wrongly made by the Assessing Officer under Section 56(2)(x) of the Income-tax Act, 1961. The Tribunal observed that for invoking the provisions of Section 56(2)(x)(b)(B) in cases where a property is received for consideration, the difference between the stamp duty value and the purchase price must exceed the higher of Rs. 50,000 or 10% of the consideration. In the present case, 10% of the consideration amounted to Rs. 2,59,87,074/-. The actual difference in stamp duty value and purchase price was Rs. 7,86,760/-, which is significantly less than the 10% threshold. Therefore, the conditions for invoking Section 56(2)(x) were not met. The Tribunal set aside the order of the CIT(A) and deleted the addition made by the AO. The ratio decidendi is that the threshold limit of 10% of consideration for invoking Section 56(2)(x)(b)(B) must be satisfied for an addition to be made when a property is acquired for consideration and the stamp duty value exceeds the consideration.

What were the facts?

The assessee, M/s Nexzone Fiscal Services Pvt. Ltd., filed an appeal against the order of the CIT(A) dated 28.05.2024, which confirmed the addition made by the Assistant Commissioner of Income Tax, National e-Assessment Centre, Delhi. The assessment year in question is 2018-19. The addition of Rs. 7,86,760/- was made under Section 56(2)(x) of the Income-tax Act, 1961, representing the difference between the stamp duty value and the agreement value of certain properties. The assessee is a real estate developer and claimed these properties were held as stock-in-trade for SRA projects. The Assessing Officer (AO) made the addition based on the difference in value for one property where the stamp duty value exceeded the purchase value. The CIT(A) upheld the AO's order, leading to the present appeal before the ITAT.

What were the issues?

1. Whether the Learned CIT(Appeals) erred in confirming the order passed by the Assistant Commissioner of Income Tax, National e-Assessment Centre, Delhi, making an addition of Rs. 7,86,760/-? 2. Whether the Learned CIT(Appeals) erred in upholding the action of the Learned Assessing Officer in invoking provisions of Section 56(2)(x) of the Income Tax Act, 1961, and making an addition of Rs. 7,86,760/- being the difference between the Stamp Duty Value and Agreement Value? Assessee's Contentions: The assessee argued that it is engaged in real estate development and the properties purchased were for re-development under SRA projects, thus held as stock-in-trade. It contended that Section 56(2)(x) of the Act, read with Explanation to Section 56(2)(vii), excludes 'Current Assets' from its ambit. Furthermore, it argued that for a property purchased for consideration, the addition under Section 56(2)(x)(b)(B) is only applicable if the excess stamp duty value over consideration is more than the higher of Rs. 50,000 or 10% of the consideration. In this case, the difference was only 0.30% of the consideration, which is less than the permissible limit. Revenue's Contentions: No specific contentions were recorded for the revenue in the provided judgment.

Which sections of the Income-tax Act were involved?

Section 56(2)(x),Section 56(2)(vii)

AI-generated summary — verify with the full judgment below

Before: SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL

For Appellant: Shri K. P. Kapadia
Hearing: 28.05.2024Pronounced: 27.06.2024

Appellant by : Shri K. P. Kapadia Respondent by : Shri Nagnath Pasale Date of Hearing 28.05.2024 Date of Pronouncement 27.06.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-.... [hereinafter referred to as “CIT(A)”] dated 28.05.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the relevant Assessment Year [A.Y.] 2018-19.

2. The assessee has raised following grounds of appeal:

P a g e | 2 AY 2018-19 Nexzone Fiscal Services Pvt. Ltd. Mumbai “1. The Learned CIT (Appeals) erred in confirming the order passed by Assistant Commissioner of Income Tax, National e- Assessment Centre. Delhi (herein after referred to as 'the Assessing Officer') making an addition of Rs.7.86.760/- 2. The Learned CIT (Appeals) erred in upholding the action of the Learned Assessing Officer in invoking provisions of Section 56(2)(x) of the Income Tax Act, 1961 (herein after referred to as 'the Act') and making an addition of Rs.7,86,760/- being the difference between the Stamp Duty Value and Agreement Value WHEN 1. Your appellant is engaged in the business of real estate development at Bhandup. Mumbai. The ongoing projects are in progress of Development under the Slum Rehabilitation Schemes (SRA).

2.

Being a Builder & Developer, of the Properties Purchased by Your Appellant during the Financial Year 2017-18 were for the purpose of re-development of the SRA Projects and they were held as Stock-in-Trade.

3. The Provisions of Section 56(2)(x) read with Clause d of the Explanation to Section 56(2)(vii) (which defines immovable property as a Capital Asset being Land or Building or Both) categorically excludes the "Current Assets" out of the ambit of Section 56(2)(x).

4.

Moreover, Clause B of Sub-section (b) of Section 56(2)(x) provides as under: Quote 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.- P a g e | 3 AY 2018-19 Nexzone Fiscal Services Pvt. Ltd. Mumbai (A) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property: (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 ten per cent of the consideration: Unquote In view of these specific provisions, the Learned CIT (A), erred in confirming the addition of Rs.7,86,760/- when the difference between the Consideration and the Stamp Duty Value which was only 0.30% of the Consideration. 3.In view of this laws and facts, Your Appellant Prays Your Honor to delete the addition of Rs.7,86,760/- made by the Assessing Officer u/s 56(2)(x) of the Act for the Assessment Year 2018-19.”

3.

Brief facts of the case are that the assessee filed return declaring nil income for AY 2018-19 on 29.08.2018. The case was selected for scrutiny and assessment was completed, after making an addition of Rs. 7,86,760/- u/s 56(2)(x) of the Act. The assessee company is engaged in the business of real estate development in Mumbai. The projects are being in initial stages wherein acquisition and development of land is in progress during the year under consideration. The difference between stamp duty value and consideration paid/payable in respect of four properties during the year was submitted as per the following chart:

P a g e | 4 AY 2018-19 Nexzone Fiscal Services Pvt. Ltd. Mumbai Sr Land Registration Registration Stamp Duty Total No. details No. date Value consideration paid/payable 1. CTS No. KRL1-10377- 17.10.2017 40,045,000/- 40,331,367/- 23,24,25 2017 2. CTS No. KRL1-10380- 17.10.2017 18,576,800/- 19,180,740/- 22(Part) 2017 3. CTS No. 15 KRL1-1506- 15.02.2018 186,281,500/- 186,475,780/- (Part) 2018 4. CTS No. KRL 1-1504- 18.02.2018 260,657,500/- 259,870,740/- 17,18,19,20 2018 4. Out of these, only in respect of one property at serial No. 4, the stamp duty value exceeds the purchase value. The difference was added to the income u/s 56(2)(x) by the AO vide order dated 31.03.2021.

5.

Aggrieved with this order, the assessee filed an appeal before the Ld. CIT(A)/NFAC on 23.04.2021. Vide order dated 27.09.2023 the Ld. CIT(A), after considering the facts and circumstances of the case, dismissed the appeal.

6.

We have considered the rival submissions. After careful consideration of the submissions and legal provisions, it is observed as under: a. The difference between stamp duty and purchase price has been taxed u/s 56(2)(x) of the Act. Relevant provisions of section 56(2)(x) are reproduced below: “56.

2. In particular, and without prejudice to the generality of the provisions of sub-section(1), the following incomes, shall be P a g e | 5 ITA No. 4730/Mum/2023 AY 2018-19 Nexzone Fiscal Services Pvt. Ltd. Mumbai charegeable to income tax under the head “income from other sources”, namely:- . . . . (x) where any person receives, in any previous year, from any person or persons on or after the 1st day 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; (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 87[ten] per cent of the consider- ration: Provided that where the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement may be taken for the purposes of this sub- clause: ……. …….. ………” b. In this case, the difference between the purchase price and the stamp duty value is Rs. 7,86,760/- only. In order to P a g e | 6 AY 2018-19 Nexzone Fiscal Services Pvt. Ltd. Mumbai invoke the provisions of section 56(2)(x), the difference between stamp duty value and purchase value has to be higher of the following amounts (i) 50,000/- (ii) 10% of the consideration. c. In this case, 10% of consideration come to 2,59,87,074/-. However, the difference in the present case is only Rs. 7,86,760/- which is far less than the permissible limit of 10% (i.e. Rs. 2,59,87,074/-). As such the provisions of section 56(2)(x) have been wrongly invoked in this case. We, therefore, set aside the order of the Ld. CIT(A) and delete the additions made by the AO of Rs. 7,86,760/-.

7.

In the result, the appeal of the assessee is allowed.

More judgments on Section 56(2)(x)

All 565 judgments and leading authorities on Section 56(2)(x) →

Recent GST High Court judgments

Search GST case law →