The Chennai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition under section 50C of the Income Tax Act,1961 as the difference between the Sale Consideration and Stamp Duty Valuation is Less than 10%.
The revenue challenged the order passed by the Commissioner of Income Tax (Appeals) which deletes the disallowance of interest expenses of Rs. 6,29,504/- which was decided in favour of the assessee.
It was contended that CIT(A) erred in deleting the addition under section 50C of the Act of Rs. 85,36,200/- relying on the decision of the Chennai Bench of the Tribunal in the case of SD Vimal Chand Jain HUF vs. ITO, decided in favour of the assessee.
The assessee company is engaged in the business of exporters of Pharmaceuticals, formulations, neutraceuticals and medical equipment etc, filed its return of income for the assessment year 2012-13 on 12.09.2012, declaring the total income of Rs. 13,11,34,710/-.
The assessment has been completed under section 143(3) of the Income Tax Act, 1961 and determined a total income of Rs. 13,18,89,331/-, by making additions of Rs. 6,29,504/- towards disallowance of interest expenses on the term loan.
The assessment has been subsequently re-opened under section 147 of the Act and the assessment has been completed under section 143(3) r.w.s. 147 of the Act on 18.08.2017 and determined a total income of Rs. 14,04,25,531/-, by making additions towards the difference between the guideline value of the property and sale consideration under section 50C of the Act at Rs. 85,36,200/-.
The CIT(A)deleted additions made towards the difference in the value of the consideration received for the transfer of property on the ground that, the difference between guideline value and stated consideration is less than 10% and in view of the 3rd proviso to section 50C(1) of the Act, if said difference is less than 10%, then no additions can be made.
A Coram comprising of Shri V Durga Rao, Judicial Member and Shri G Manjunatha, Accountant Member observed that there is a difference between stated consideration for the sale of property and guideline value fixed for payment of stamp duty.
It was observed that as per the 3rd proviso to section 50C(1) of the Act, inserted by the Financial Act, 2018 w.e.f. 01.04.2019, if difference the between stated consideration and guideline value does not exceed 10% of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of consideration.
In light of the case of Doraisamy Suresh, (HUF) vs ACIT, it was held that “if the difference between stated consideration and guideline value is less than 10% as prescribed under 3rd proviso to section 50C(1), then there cannot be any addition by substituting the full value of consideration. “
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