INCOME TAX ACT, 1961

Section 56(2)(viib) Section 56(2)(x) Section 50C

Capital gains - Addition under section 50C - Applicability of third proviso of section 50C(1) -

Assessee purchased four immovable properties. From the details furnished, AO found that declared sale consideration shown by the assessee was lesser than the stamp duty value (market value) determined by the stamp duty authority. The difference in value in respect of the subject properties worked out to a total amount of Rs. 23,30,695. Therefore AO added said amount invoking the provisions of section 56(2)(vii)(b)(ii). Assessee submitted that difference in value of property as per assessee and the stamp duty authority was purely on account of slight delay in registration of the sale agreements. As per section 50C, the market value of property should be reckoned as on the date of sale of agreement and not on the date of registration. Without prejudice, difference between the agreement value and the stamp duty value determined by the stamp duty authority varied between 1% to a maximum of 9% in respect of the properties purchased. Thus, as per the third proviso to section 50C(1) difference in value could not be added to the income of assessee even under section 56(2)(vii)(b)(ii) of the Act. Further, third proviso to section 50C(1) would not only apply retrospectively, but would even apply to section 56(2)(vii)(b)(ii). Held: On a conjoint reading of sections 50C, 43CA and 56(2)(x), the legislative intention becomes absolutely clear that wherever the statute provides for adoption of the value determined by the stamp valuation authority as the deemed sale consideration, in case, it exceeds declared sale consideration, exceptions have also been provided not to adopt the market value if the difference between the value declared by the assessee and determined by the stamp duty authority is within a permissible limit. The reason for not providing such an exception in section 56(2)(vii)(b)(ii) is patent and obvious. As could be seen, amendments to sections 50C, 56(2)(x) and 43CA providing for exception in case of marginal difference between declared sale consideration and value determined by the stamp valuation authority were introduced to the statute by Finance Act, 2018 with effect from 1-4-2019. Meaning thereby, the legislature did not feel necessity of introducing such an exception to section 56(2)(vii)(b)(ii) simply for the reason that such provision was applicable for a period between 1-10-2009 to 1-4-2017. Therefore, non-introduction of similar exception to section 56(2)(vii(b)(ii) could not be held against the assessee. Rather, section 56(2)(vii)(b)(ii) has to be harmoniously construed along with sections 50C, 56(2)(x) and 43CA and exceptions provided in the later three provisions had to be read into section 56(2)(vii)(b)(ii) to provide true meaning to the intention of the legislature. Exception to section 50C(1) by way of third proviso and section 56(2)(x)(b)(B) being curative in nature and beneficial povisions, was application retrospectively. Thus, assessee would be eligible to get benefit of ten per cent margin difference in the valuation between value determined by stamp duty authority and the declared sale consideration, and as variation between the aforesaid two values fell within the range of ten per cent, no addition could be made.

Followed:Maria Fernandes Cheryl v. ITO [ITA 4850/Mum/2019, dt. 15-1-2021] : 2021 TaxPub(DT) 386 (Mum-Trib) and Sandip Patil v. ITO ITA 924/Bang/2019, dated 9-9-2020

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