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Mumbai: Relief to a non-resident taxpayer who bought an apartment in a posh suburb of the city Income Tax Appellate Tribunal ,it on), the Mumbai bench held that Rs 55.9 lakh, the difference between the agreement value of the flat and the stamp duty value on the date of registration, cannot be charged to tax as ‘income from other sources’ in his hands.
Usually, when a person books a flat, the purchase price is finalized and reflected in the agreement. After the amount paid at the time of booking, the buyer makes periodic payments over a number of months. The registration of the flat takes place later. Obviously, the stamp duty value on the date of registration is very high.
In many instances, Income tax The authorities have treated this difference in value as taxable income and raised heavy tax demand along with penal interest.
“Section 56(2)(vii)(b), which is included in this ITAT Order, has been substituted by section 56(2)(x). However, the ITAT order will be applicable to the amended law as well, as the provisions remain the same,” said Gautam Nayak, tax partner, CNK & Associates.
The provisions of section 56(2)(vii)(b) of the IT Act states that where the date of agreement (which fixes the amount of consideration for transfer of immovable property) and the date of registration are not the same, if the payment If done through banking channels (modes other than cash) then the stamp duty value on the date of settlement may be considered.
“In this case, the ITAT accepted the booking form as evidence of the agreement to purchase the property and determination of the purchase price. Apart from the fact that the payment was made through banking channels, the ITAT also took cognizance of the fact that the purchase consideration was in excess of the stamp duty value, which was prevalent then,” said Nayak.
The taxpayer initially did not file the IT return for the financial year 2015-16, possibly because his income, taxable in India, was much below the exemption limit. On the basis of information that he had purchased a flat, reassessment proceedings were initiated. In response to the IT notice, he filed a tax return declaring a taxable income of only Rs 58,940.
But the IT officer invoked section 56(2)(vii)(b) and sought to levy tax on Rs 55.9 lakh – stamp duty value on the date of registration (Rs 4.7 crore) and agreement value (Rs 4.1 crore). The difference between ,
Eventually, the case reached the ITAT. The non-resident taxpayer stated that when the flat was booked, a significant part of the price was paid by cheque. Thereafter, part payment was made through banking channels.
He also placed evidence on record which showed that the stamp duty value on the date of booking of the flat was less than the agreement value. Thus the addition made by the IT Officer by invoking the provisions of section 56(2)(vii)(b) of the Act cannot be sustained.
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