No taxation U/s 56(2)(vii) if the transaction of sale was pursuant to genuine agreement to sale entered earlier

 1,093 total views

No taxation U/s 56(2)(vii) if the transaction of sale was pursuant to genuine agreement to sale entered earlier

 

 

In the case of D.S.N.Malleswara Rao vs. ITO [I.T.A.No. 538/Viz/2018], though the case was related to section section 56(2)(vii), the ratio can very well be applied to the present case. In this case, the ITAT held that the law was applicable as on the date of agreement required to be applied for taxing the income. In this case, the assessee has purchased the immovable property from Sri Balanagu Prasanna Kumar vide Doc.No.1465/2013 of Amaravathi SRO on 31.10.2013 for a consideration of Rs.50,00,000/-, but the market value of the said property was Rs.1,12,02,000/- as per SRO Amaravathi. Therefore, the Assessing Officer (AO) was of the view that the transaction attracts provisions of section 56(2)(vii)(b) of the Act since the purchase price of the property was less than the stamp duty value, hence, issued show cause notice to the assessee as to why the said difference amount of Rs.62.02 lakhs should not be treated as income from other sources. In response to the notice, the assessee filed objection stating that the property in question was purchased as per the agreement entered into by the assessee on 19.03.2007 and the part payment was made in 2009 by cheque. AO rejected the claim of the assessee and proceeded with the addition. On appeal before ITAT, it has held that the assessee had entered into genuine agreement for purchase of land prior to insertion of proviso u/s 56(2)(vii)(b) of the Act and the provision has come into force w.e.f. 01.10.2009. There is no dispute that there was an agreement for sale of the property to the assessee by the vendor. The department also did not dispute the contents of the agreement. With this, the ITAT has held that there is no case for invoking the provisions of section 56(2)(vii)(b) to tax the difference between the SRO value and the actual consideration paid as income from other sources. Accordingly, the orders of the lower authorities are set aside and the appeal of the assessee is allowed.

 

 

 

 

Leave a Comment

Your email address will not be published.

the taxtalk

online portal for tax news, update, judgment, article, circular, income tax, gst, notification Simplifying the tax and tax laws is the main motto of the team tax talk, solving