The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that the benefit of higher tolerance band of 10% for difference between the sale price of flat and the stamp duty valuation to apply retrospectively.
The assessee, Maria Fernandes Cheryl is non-resident assessee. During the relevant financial period, she sold her flat for a consideration of Rs 75,00,000, even though the valuation of this property, for the purpose of charging stamp duty, was Rs 79,91,500.
The capital gains were thus computed by treating the sale consideration at Rs 75,00,000, and, accordingly, offered to tax. The Assessing Officer, however, was of the view that in view of the provisions of Section 50 C, the assessee has to adopt the Stamp Duty Valuation, which was Rs 79,91,500, for the purpose of computing the capital gains.
The completed assessment was reopened in this backdrop, and the capital gains were computed on the basis of sale consideration being adopted at Rs 79,91,500. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without any success.
The assessee contended that the Commissioner of Income Tax (Appeals) erred in facts and in law in not appreciating that the difference between sale consideration and value adopted for the purpose of stamp duty was only 6.55%, and therefore addition under section 50C of the Act is not justified.
As noted by the Central Board of Direct Taxes circular, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed, “It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location”.
The coram headed by Vice President, Pramod Kumar and Saktijit Dey noted that as against the stated consideration of Rs 75,00,000, the stamp duty valuation of the property is Rs 79,91,500. The difference is just Rs 4,91,500, which is about 6.55% of the stated sale consideration. As the difference between the stated consideration in relation to the stamp duty valuation is admittedly less than 10% of the stated consideration in this case.
The ITAT, while granting the relief to the assessee held that Section 50C will have no application in the matter. The enhancement in capital gain computation, as made by the Assessing Officer, thus stands disapproved.
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