MUMBAI: The Income-Tax Appellate Tribunal (ITAT), Mumbai bench, has given an order in favour of a taxpayer who had jointly purchased a flat with her husband.
The tax tribunal held that a sum of Rs 24.3 lakh which was her share of the difference between the agreement value as per the allotment letter and the stamp duty value on the date of registration, which followed at a later date, cannot be taxed in her hands.
Typically, when a home buyer books a flat, the purchase price is finalised on this date and is reflected in the letter of allotment or agreement. In addition to the sum paid at the time of booking, the buyer makes periodic payments over several months. The flat gets registered at a later date. Understandably, the stamp duty value is much higher at the time of registration.
In several instances, though, income-tax (I-T) officers have treated the difference between the agreement and stamp duty value as on the date of registration as taxable income and raised heavy tax demands, including penal interest.
Provisos to Income Tax Act’s Section 56 (2)(vii)(b) state that where the date of the agreement, which is 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 if the payments are via banking channels (in modes other than by cash). Section 56(2)(vii)(b), covered by this ITAT order, has been replaced by Section 56(2)(x).
According to tax experts, the ITAT order would also apply to the amended law, as the provisions are similar.
In this case, Rekha Singh, the taxpayer, contested the matter before the ITAT. The commissioner of income-tax appeals (national faceless assessment centre) had upheld the addition of Rs 24.3 lakh to the taxpayer’s income for the financial year 2014-15.
In addition, he had denied the benefit of 56 (2)(vii)(b) by stating the letter of allotment is not a registered sale deed and cannot be considered as the date of agreement. The appeals-commissioner had also said the payments before the date of the registration had only been made by her husband, thus this benefit should be denied to her.
The ITAT directed the I-T official that the stamp duty value as on the date of allotment (October 16, 2010) should be taken into consideration and not the stamp duty value as on the date of registration, done later on December 29, 2014.
The ITAT bench composed of Kuldip Singh, judicial member and Amarjit Singh, accountant member, held: “We do not find any merit in the findings of the Commissioner-Appeals that before the registration of the flat only the other co-owner (husband of the taxpayer) has made payment. Since, it is joint property, it is immaterial who had made payment before the date of its registration.” In several cases, ITAT benches have passed similar orders in favour of taxpayers.
