ITAT Delhi Bench rules in favour of non-resident taxpayer in Mumbai property tax case

In a recent development, the Income-tax Appellate Tribunal (ITAT), Delhi bench, has delivered a significant verdict in favor of a non-resident taxpayer who had acquired a flat in a prestigious suburb of Mumbai. The tribunal's ruling pertained to the taxation of the difference between the stamp duty value and the agreement value of the property.

The case revolved around Shyamkumar Madhavdas Chugh, who faced tax implications on the sum of INR 40.45 lakh, representing the variance between the stamp duty value on the date of flat registration and the agreed-upon value. The ITAT held that this difference cannot be classified as 'Income from other sources' in Chugh's tax filings.

Typically, during property transactions, the purchase price is established on the agreement date and reflects in the contract. However, the registration of the property often occurs later, resulting in a higher stamp duty value at that time.

The ITAT's decision highlighted the provisions of Section 56(2)(vi)(b) and its applicability to the case. It noted that in instances where the agreement and registration dates differ, and payments are made through banking channels, the stamp duty value on the agreement date should be considered.

Chugh had entered into an agreement in 2010, but the property's registration took place in 2013. Additionally, a portion of the consideration was paid via cheque before the agreement date in 2010. Consequently, the ITAT concluded that the stamp duty value from the agreement date in 2010 should be taken into account, thereby nullifying the tax demand imposed by the Income Tax (I-T) officer.

Tax experts emphasized that while the specific provision cited in the ITAT's ruling, Section 56(2)(vi)(b), has been replaced by a different section, the essence of the decision remains relevant under the amended law.

The tribunal's verdict serves as a significant precedent in clarifying the tax treatment of property transactions, particularly concerning the timing of agreement and registration dates.

Next (Phoenix Mills reports strong Q3 FY24 results with 69 percent rise in net profit)

ITAT Delhi Bench rules in favour of non-resident taxpayer in Mumbai property tax case

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