This website has already published an article on the issue of new provision u/s 56(2)(vii)(b) that has become effective from 01/04/2014 ( assessment year 2014-15) . This provision may be responsible for CASS selection of many cases of house/flats registration during FY 2013-14 . In all those cases, A.O must be going to apply the provision stating that the stamp duty value .But , in my considered opinion, the law u/s 56(2)(vii) applicable from the assessment year 2014-15 is not applicable in most of the cases of house/flats registering in the FY 2013-14 , if certain conditions are satisfied ( which I believe is satisfied in most of cases !). Here are the reasons for such an opinion :
Let us see the Provision /s 56(2)(vii)(b)
56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—
(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—
(b) any immovable property,—
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;
Table of Contents
Word Used “Receive ” and Not Registered
The most important word to note is that in section 56(2)(vii) (b) , the legislature has used the word “receives” which is not defined anywhere in the Income Tax Act. Further , legislature has also not used the word “registered in name of individual of HUF “ or even “transferred in name of individual of HUF”.
Without going into much of legal jargons on the word “receive” , if we try to apply the meaning of word “receive” in context of a flat or immovable property buying or purchase , it means when you actually receives a flat or property from the builder who acts as contractor for you .
At best , the meaning of word “receive” in the context of flat/property buying can be stretched to the point of time when the said capital asset is considered transferred to the buyer . Fortunately ,the word “transfer”, has been defined under section 2(47)(v) of the Income Tax Act to mean as under
|(v)||any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or|
The definition of transfer thus not only includes sale , exchange etc , but also includes a transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 .
Thus , the property will be considered as received before 01/04/2013 (FY 2013-14) if :
- You booked a flat in any year .
- The booking amount was paid preferably in cheque.
- After that substantial amount was paid to builder before 01/04/2013 Possession of flat or property was taken before 01/04/2013
If that happens , it is easy to deduce that the property was not received in FY 2013-14 , but earlier . Therefore , a provision which was not applicable before FY 2013-14 can not me made applicable simply because the document of conveyance was registered ibn FY 2013-14
Judicial Decision on Application of Law From Back Date
The provision of section 50C under which a concept of considering a deemed sales considerations equivalent to value adopted for stamp duty was introduced under I.T.Act for the first time by Finance Act 2001 effective from Assessment Year 2002-03 . In one case, Smt. Rajashree Bihani vs ITO  16 taxmann.com 44(KOL) the facts involved was as under :
- The assessee filed her return of income for the assessment year 2005-06 on 25-07-2005 disclosing computation of long-term capital gain at Nil after claiming deduction u/s.54F of the Act for the entire capital gain.
- The assessee sold her 1/3rd undivided share of plot of land for a total consideration of Rs. 24.10 lacs by virtue of an agreement for sale dated 28-12-2000 entered into with the purchaser.
- The assessee handed over the possession of land to the purchaser on 28-12-2002 vide a possession letter addressed to the buyer.
- The assessee also received part consideration to the extent of 18.75 lacs between 01-10-2000 to 10-03-2001 except the balance amount of Rs. 5.35 lacs.
- The assessee also executed a power of attorney in favour of Director of buyer company.
One of the grounds raised by the assessee before ITAT was that the A.O & CIT (A) erred in law by invoking provision of section 50C in the year of registration i.e Fy 2004-05 whereas the property was actually transferred in the assessment year 2001-02 .
ITAT favoured the assessee on this ground holding that the provision is not applicable when the facts of the case clearly shows that the property was transferred much before the year when the law u/s 50 C was introduced. Here is the excerpt from the order ITAT
- As regards to applicability of section 50C of the Act to the transfer of plot of land of the assessee as on 28.12.2000, on the basis that the amount of Rs. 43,75,983/- assessed by Stamp Valuation Authority to be deemed full value of the sale consideration for the purposes of computation of long term capital gain, it is stated that section 50C of the Act was inserted by the Finance Act, 2002 w.e.f. 1.4.2003 and thus, is not applicable to the assessee’s case. Once it is a fact that the transfer took place as on 28.12.2000, the provisions of section 50C which was made applicable w.e.f. 1.4.2003 i.e., for and from assessment year 2003-04, the same will not apply to assessment year 2001-02, when the capital asset of the assessee was transferred. Accordingly, in our considered opinion, the provisions of section 50C of the Act will not apply to the present case.
- Section 56(2)(vii)(b) is introduced in the I.T.Act from assessment year 2014-15 (FY 2013-14) . It is not retrospective.
- It covers any transfer or receipt of property which is materialized in the year Fy 2013-14 and not a case where the property was transferred earlier than FY 2013-14 , even though registration is done in the year FY 2013-14.
- This provision does not cover a case where registration took place in FY 2013-14 , but for reasons the possession of flat or property was taken before FY 2013-14 after substantial part payment for the property.
- On a similar provision i.e 50C which invokes stamp duty value as deemed sales consideration we have benefit of clear decision from ITAT , Kolkata.
Since assessment year 2014-15 is the first year, the assessing officer will not heed the logic and judicial arguments , so it is advised that the tax practitioners must file appeal on aforesaid ground .