Section 56(2)(vii)(b)(ii) – The provisions of section 56(2)(vii)(b)(ii) will apply if they were on the statute as on the date of entering into the agreement

18. [2020] 118 taxmann.com 463
(Visak.)(Trib.) ACIT vs. Anala Anjibabu A.Y.: 2014-15 Date of order: 17^th August, 2020

Section
56(2)(vii)(b)(ii) – The provisions of section 56(2)(vii)(b)(ii) will apply if
they were on the statute as on the date of entering into the agreement

FACTS

In the course of assessment
proceedings, the A.O. found that the assessee has purchased an immovable
property at Srivalli Nagar from Smt. Simhadri Sunitha for a consideration of
Rs. 5 crores and the transaction was registered on 28^th October,
2013. The value of the said property for registration purpose was fixed at Rs.
12,67,82,500. The A.O. invoked the provisions of section 56(2)(vii)(b) and
taxed the difference between the consideration paid and the SRO value as on the
date of agreement and completed the assessment.

Aggrieved, the assessee
preferred an appeal to the CIT(A) who allowed the appeal following the ratio of the decision of the
Visakhapatnam Bench of the Tribunal in the case of M. Siva Parvathi vs. ITO [2010] 129 TTJ 463 (Visakhapatnam),
rendered in the context of section 50C. He held that since the agreement for
sale was entered into by the assessee for the purpose of purchase of the
property in August, 2012 related to the F.Y. 2012-13, relevant to the A.Y.
2013-14, which is prior to insertion of section 56(2)(vii)(b), section
56(2)(vii)(b) has no application in the assessee’s case.

Aggrieved, the Revenue
preferred an appeal to the Tribunal contending that section 50C and section
56(2)(vii)(b) are independent provisions related to different situations and
the case law decided for the application of section 50C cannot be applied for
deciding the issue relating to the provisions of section 56(2)(vii)(b).

HELD

The Tribunal observed –

(i) that the question to be decided is whether or
not, in the facts and circumstances of the case, the provisions of section
56(2)(vii)(b)(ii) are applicable;

(ii)         that the provisions of section
56(2)(vii)(b)(ii) came into the statute by the Finance Act, 2013 w.e.f. 1^st
April, 2014, i.e., A.Y. 2014-15. In the instant case, the assessee had
entered into the agreement for the purchase of the property on 13^th
August, 2012 for a consideration of Rs. 5 crores and paid part of the sale
consideration by cheque. In the assessment order, the A.O. acknowledged the
fact that the assessee had entered into an agreement for purchase of the
property and paid the advance of Rs. 5 crores on 13^th August, 2012.
There is no dispute with regard to the existence of the agreement;

(iii) from
the order of the CIT(A) it became clear that the property was in dispute due to
a bank loan and the original title deeds were not available for complying with
the sale formalities. Therefore, there was a delay in obtaining the title deeds
for completing the registration. Thus, there is a genuine cause for delay in
getting the property registered;

(iv) As
per the provisions of the Act, from the A.Y. 2014-15, sub clause (ii) has been
introduced so as to enable the A.O. to tax the difference in consideration if
the consideration paid is less than the stamp duty value. The A.O. is not
permitted to invoke the provisions of section 56(2)(vii)(b)(ii) in the absence
of sub-clause (ii) in the
Act as on the date of agreement.

The
Tribunal held that in this case the agreement was entered into on 13^th
August, 2012 for purchase of the property and part consideration was paid.
Hence, the provisions existing as on the date of entering into the agreement
required to be applied for deciding the taxable income. The Tribunal in the
case of D.S.N. Malleswara Rao has held
that the law as applicable as on the date of agreement required to be applied
for taxing the income. The Department has not made out any case for application
of 56(2)(vii)(b) and since the provisions of section 56(2)(vii)(b)(ii) were not
available in the statute as on the date of entering into the agreement,
following the reasoning given in the case of M.
Siva Parvathi (Supra), the same cannot be made
applicable to the assessee. The Department has not brought any evidence to show
that there was extra consideration paid by the assessee over and above the sale
agreement or sale deed.