INCOME TAX ACT, 1961

Section 56(2)(vii)(b)

Income from other sources - Applicability of section 56(2)(vii)(b) - Difference between fair market value of property and actual sale consideration being less than 10% of actual consideration -

Assessee purchased a flat for Rs. 2,33,00,000. AO noticed that stamp duty valuation at the time when “Agreement to sell” was entered into was Rs. 3,11,16,000. Accordingly, the difference between the stamp value at the time of entering agreement to sell and actual sale consideration, i.e., Rs. 78,16,000 was added under section 56(2)(vii)(b). Further, reference was made to DVO and he determined the FMV of the property at Rs. 2,68,86,400 and accordingly, the AO reduced the addition to Rs. 35,86,400. Further, CIT(A) arrived at the difference between fair market value of the property and actual sale consideration at Rs. 15,92,800. Therefore, he sustained the addition to the extent of Rs. 15,92,800. Held: Parliament has introduced third proviso in section 50C(1), as per which the difference in stamp duty valuation and actual sale consideration should be ignored, if it is less than 5%/10%. Even though said proviso has come into effect from 1-4-2019/1-4-2021, however, the same being curative in nature shall apply since the date of insertion of section 50C. In instant case, the addition of Rs. 15,92,800 sustained by CIT(A) was worked out to be less than 10% of the actual consideration of Rs. 2,33,00,000 paid by the assessee. Accordingly, the AO was directed to ignore the difference between fair market value determined by the CIT(A) and the actual sale consideration as the same was less than 10% of the actual sale consideration. Hence, the addition under section 56(2)(vii)(b) was deleted.

REFERRED : Chandra Prakash Jhunjhunwala v. DCIT (ITA No.2351/KOL/2017 dated 9-8-2019) : 2019 TaxPub(DT) 5432 (Kol-Trib) and Sita Bai Khetan v. ITO (ITA No. 823/JP/2013 dated 27-7-2016) : 2016 TaxPub(DT) 3938 (Jp-Trib)

FAVOUR : In assessee's favour.

A.Y. : 2016-17

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