INCOME TAX ACT, 1961

Section 56(2)(vii)

Income from other sources - Taxation under section 56(2)(vii) - Purchase of property for consideration less than stamp duty value - Property shown an the books as stock-in-trade

Assessee purchased immovable properties, i.e., piece of land. AO made addition under section 56(2)(vii) on account of difference between purchase price shown by assessee and DLC rate of land in the area. Assessee case was that property was in the nature of stock-in-trade of assessee. Held: Section 56(2)(vii) was introduced as a counter evasion mechanism to prevent laundering of unaccounted income. The intent is not to tax the transactions entered into in normal course of business or trade, the profits of which are taxable under specific head of income. Therefore, definition of property has been amended to provide that section 56(2)(vii) would have application to the 'property' which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade, raw material and consumable stores of any business of such recipient. Therefore, in the facts and circumstances of assessee's case when property in question was undisputedly shown in books of account of assessee as stock-in-trade then same would not fall in the ambit of property as defined in explanation to section 56(2)(vii) and consequently section 56(2)(vii) was not applicable and, therefore, addition could not be sustained.

Relied:Prem Chand Jain v. Asstt. CIT ITA No. 98/JP/2019 Order, dated 8-6-2020 : 2020 TaxPub(DT0 2718 (JP-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 36(1)(iii)

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