Homebuyer Receives Tax Relief from ITAT Kolkata After Upfront Payment for Property Amid Rising Circle Value
The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favor of a homebuyer facing a tax notice due to increased stamp duty on a property purchase. The case involved a registered agreement made in January 2021 for a property priced at Rs 1.23 crore. By the time the property was registered in September 2023, the stamp duty value had risen to approximately Rs 1.462 crore, prompting scrutiny from tax authorities.
Case Background
In 2021, the taxpayer and her husband entered into a registered agreement to buy a property for Rs 1.23 crore. The conveyance deed was executed in 2023 without any change to the original purchase price. However, the increase in the circle rate led to a significant rise in the stamp duty. The Assessing Officer (AO) compared the revised stamp duty valuation with the actual purchase price, considering the difference as a benefit received by the homebuyers. Under Section 56(2)(x), this difference is taxable if it exceeds Rs 50,000 or 10% of the purchase price.
The AO determined that the difference of approximately Rs 22.71 lakh exceeded the 10% threshold, leading to an addition of Rs 11.35 lakh to the taxpayer’s taxable income. This amount represented her 50% share of the gap between the stamp duty value and the agreed purchase price.
ITAT’s Ruling
The taxpayer contested the AO’s assessment, arguing that the property value should be based on the agreement date rather than the registration date. She highlighted that a significant portion of the payment had been made through banking channels by the time of the agreement. The CIT(A) rejected her appeal, prompting her to take the case to the ITAT.
In her appeal, the taxpayer invoked provisions under Section 56(2)(x) that allow for consideration of the stamp duty value on the agreement date if certain conditions are met. The Tribunal reviewed both the registered purchase agreement and the later conveyance deed. It found that the original agreement reflected the circle value at the time of the transaction, and the substantial payment made through banking channels qualified her for relief. The ITAT concluded that the AO’s reliance on the higher stamp duty valuation at the time of registration was incorrect and subsequently removed the Rs 11.35 lakh addition to her income.
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