The Income-Tax Appellate Tribunal (ITAT) in Mumbai delivers a favorable verdict for a taxpayer in a joint flat purchase. The ruling clarifies that the variance between agreement value and stamp duty value at registration is not taxable in her hands. Explore the details and implications of this significant decision.

Income-Tax Appellate Tribunal Decides on Taxation of Flat Purchase Discrepancy

In a recent decision, the Mumbai bench of the Income-Tax Appellate Tribunal (ITAT) ruled in favor of a taxpayer who jointly acquired a flat with her husband. The tribunal’s verdict centered on whether the difference between the agreement value and stamp duty value at the time of registration could be taxed in her hands.

Key Tribunal Ruling: Varied Stamp Duty Values

The ITAT emphasized that the sum of Rs 24.3 lakh, representing the taxpayer’s share of the difference between the agreement value as per the allotment letter and the stamp duty value on the registration date, should not be considered taxable income. This ruling has significant implications for taxpayers facing similar situations.

Background: Agreement Value vs. Stamp Duty Value

Typically, when a home buyer books a flat, the purchase price is determined and documented in the allotment letter or agreement. Despite periodic payments made over several months, the flat is registered at a later date, leading to a higher stamp duty value. Tax authorities have, in some instances, treated this difference as taxable income, resulting in substantial tax demands.

Legal Provisions and Impact

The ruling invokes Provisos to Income Tax Act’s Section 56 (2)(vii)(b), which allows the stamp duty value on the date of agreement if the agreement and registration dates differ. This is particularly relevant when payments are made through banking channels.

Tax experts believe that this ITAT order is applicable to the amended law, considering the similarities in provisions.

Case Details: Rekha Singh’s Challenge

Rekha Singh, the taxpayer, contested the matter before the ITAT after the Commissioner of Income-Tax Appeals upheld the addition of Rs 24.3 lakh to her income for the financial year 2014-15. The Commissioner had denied the benefit of Section 56(2)(vii)(b) by arguing that the letter of allotment couldn’t be considered the date of agreement.

ITAT Verdict and Impartial Payment Consideration

The ITAT directed that the stamp duty value on the date of allotment (October 16, 2010) should be considered, irrespective of who made payments before registration. The tribunal emphasized that, as joint property owners, it is immaterial who made the payments before registration.

Expert Opinions and Previous Instances

Legal experts and tax professionals view this ruling as a positive development, ensuring a smoother property transaction process without undue tax implications. Similar decisions in favor of taxpayers have been made in various cases by different ITAT benches.

Conclusion: Clarity in Taxation of Property Transactions

In conclusion, the ITAT’s recent ruling brings clarity to the taxation of property transactions, particularly regarding the difference between agreement and stamp duty values. This decision is expected to benefit taxpayers facing similar challenges and streamline the taxation process associated with property purchases.

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