Section 56(2)(vii)(b)(ii) – Even if there is no separate agreement between the parties in writing, but the agreement which is registered itself shows that the terms and conditions as contained in the said agreement were agreed between the parties at the time of booking of the flat

16. [2020] 120 taxmann.com 216 (Jai.)(Trib.) Radha Kishan Kungwani vs. ITO A.Y.: 2015-16 Date of order: 19^th August, 2020

Section
56(2)(vii)(b)(ii) – Even if there is no separate agreement between the parties
in writing, but the agreement which is registered itself shows that the terms
and conditions as contained in the said agreement were agreed between the
parties at the time of booking of the flat

FACTS

The assessee, vide sale agreement dated 16^th
September, 2014 purchased a flat from HDIL for a consideration of Rs.
1,38,03,550. The stamp duty value of the flat at the time of the registration
of the sale agreement was Rs. 1,53,43,036. The A.O. invoked the provisions of
section 56(2)(vii) for making an addition of the differential amount between
the stamp duty valuation and purchase consideration paid by the assessee.

The
assessee claimed that he booked the flat on 6^th September, 2010 and
made advance payments of Rs. 2,51,000 on 10^th October, 2010 and Rs.
9,87,090 on 14^th October, 2010, the total amounting to Rs. 12,38,090,
and contended that the stamp duty value as on the date of agreement be
considered instead of the stamp duty value as on the date of registration. The
A.O. rejected this contention and made an addition of Rs. 15,39,486, being the
difference between the stamp duty value on the date of registration of the agreement and the amount of
consideration paid by the assessee u/s 56(2)(vii).

Aggrieved, the assessee
preferred an appeal to the CIT(A) who confirmed the A.O.’s action.

The assessee then preferred
an appeal to the Tribunal.

HELD

The
Tribunal noted that vide letter dated 16^th October, 2017, the builder
has specifically confirmed that the cost of the flat is Rs. 1,38,03,550 and the
booking was done by payment of Rs. 2,51,000 by cheque dated 10^th
October, 2010 drawn on Andhra Bank. This fact was not disputed by the A.O. This
payment is even reflected in the final sale agreement which is registered. The
terms and conditions which are reduced in writing in the agreement registered
on 16^th September, 2014 relate to the performance of both the
parties right from the beginning, i.e., the date of booking of the flat. All
these facts are duly acknowledged by the parties in the registered agreement,
that earlier there was a booking of the flat and the assessee made part payment
of the consideration.

The Tribunal held that all
these facts clearly established that at the time of booking there was an
agreement between the parties regarding the sale and purchase of the flat and
payment of the purchase consideration as per the agreed schedule. Thus, even if
there is no separate agreement between the parties in writing but the agreement
which is registered itself shows that the terms and conditions as contained in
the said agreement were agreed between the parties at the time of the booking.
On this basis, part payment was made by the assessee on 10^th
October, 2010 and subsequently on 14^th October, both through cheque.

In view of the above, the
Tribunal held that the first and second provisos
to section 56(2)(vii) would be applicable in this case and the stamp duty
valuation or the fair market value of the property shall be considered as on
the date of booking and payment made by the assessee towards the booking.

The Tribunal set aside the
order passed by the CIT(A) and remanded the matter to the record of the A.O. to
apply the stamp duty valuation as on 10^th October, 2010 when the
assessee booked the flat and made the part payment. Consequently, if there is
any difference on account of the stamp duty valuation being higher than the
purchase consideration paid by the assessee, the same would be added to the
income of the assessee under the provisions of section 56(2)(vii)(b).