In a noteworthy decision, the Income-tax Appellate Tribunal (ITAT), Delhi bench, ruled in favor of a non-resident taxpayer regarding the taxation of the variance between the stamp duty value and the agreement value of a property in Mumbai. The case of Shyamkumar Madhavdas Chugh highlighted the discrepancy between the agreement and registration dates, leading to differing values. The ITAT held that this difference cannot be deemed 'Income from other sources,' citing Section 56(2)(vi)(b) and emphasizing the importance of considering the stamp duty value on the agreement date. This ruling sets a significant precedent in clarifying tax treatment for property transactions, especially concerning timing disparities.
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Tax experts emphasized that while the specific provision cited in the ITAT's ruling, Section 56(2)(vi)(b), has been replaced by a different section, the essence of the decision remains relevant under the amended law.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.
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