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The Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) recently issued a landmark decision in favour of a taxpayer, Rekha Singh, who jointly purchased a flat with her husband. The tribunal ruled against taxing a sum of Rs 24.3 lakh in her hands, which was the difference between the agreement value as per the allotment letter and the stamp duty value at a later date of registration.
Typically, when a home buyer secures a flat, the purchase price is determined on the booking date and documented in the letter of allotment or agreement. Over subsequent months, the buyer makes periodic payments, and the flat is officially registered at a later date, resulting in a higher stamp duty value. However, income-tax officers have, in several instances, considered the difference between the agreement and stamp duty values at the registration date as taxable income, leading to substantial tax demands with penal interest.
The ITAT's decision hinged on Section 56(2)(vii)(b) of the Income Tax Act, which stipulates that if the consideration amount for property transfer during the agreement date and registration differ, then the stamp duty value at the agreement date may be considered if payments are made through banking channels. Although this section has been replaced by Section 56(2)(x), the ITAT asserted that its ruling applies to the amended law due to the similarity in provisions.
Rekha Singh contested the matter before the ITAT after the commissioner of income-tax appeals, from the national faceless assessment centre, added Rs 24.3 lakh to her income for the financial year 2014-15. The appeals commissioner had denied the benefit of Section 56(2)(vii)(b), arguing that the letter of allotment is not a registered sale deed, and couldn't be considered the agreement date. Furthermore, he contended that payments before registration were solely made by Rekha Singh's husband, justifying the denial of the benefit to her.
The ITAT directed the income-tax official to consider the stamp duty value as of the allotment date, October 16, 2010, rather than the later registration date of December 29, 2014. The tribunal emphasised that payment responsibility before registration was immaterial since the property was jointly owned. The decision establishes a precedent, with other ITAT benches having similarly ruled in favour of taxpayers facing comparable challenges. The ruling safeguards taxpayers from being taxed on the difference between agreement and stamp duty values in cases of jointly owned properties.
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