Date of transfer of immovable property is when sale deed is executed and not when recorded by Registrar

Date of transfer of immovable property is when sale deed is executed and not when it is recorded by the Registrar. ITAT deletes addition u/s 56(2)(vii)(b)

The instant appeals were filed by the assessee against the order of the CIT(A) confirming the action of assessing officer (AO) in making addition u/s 56(2)(vii)(b) of the Income Tax Act, 1961 (the Act) being difference between Stamp duty Valuation and purchase consideration as per registered sale deed of immovable property.

ABCAUS Case Law Citation
ABCAUS 2375 (2018) 06 ITAT

On verification of the details filed by the assessee, the AO observed that as per ganatri-patrak furnished by the sub-registrar, the property was valued at a price much higher than as declared in the balance sheet furnished by the assessee.

The assessee submitted that Section 56(vii)(b), as substituted by Finance Act, 2013, came into effect from the 01.04.2014 which provide for the effect of immovable property purchased for inadequate consideration in the hand of purchaser and requested that his case did not come in Financial Year 2014-15. Hence, he contended that the said section was not applicable.

However the AO did not agree with the contention of the assessee and added the difference of amount to the total income of the assessee as per provisions of section 56(vii)(b)of the Act.

Against the said order, assessee preferred first statutory appeal before the CIT(A) who confirmed the order of the AO.

The Tribunal observed that Section 56(2)(vii)(b) was brought by amendment in Finance Act, 2013 which was to be made effect from 01.04.2014. The appellant had contended that the date of sale was not 01.04.2013 but 30.03.2013 and in support of its contention he had filed copy of sale deed on which transferor and transferee had put their signature along with dated 30.03.2013 . But same sale deed was registered in the record of sub-registrar on 01.04.2014.

The Tribunal observed that the Gujarat High Court had held that capital gains are deemed to be the income of the previous year in which the transfer of capital asset is effected. The expression “effected” in the context refers to the stage when the transfer of asset becomes complete or operative in the sense that the title of the transferor is extinguished and the title of the transferee is created— Word ‘transfer’ as defined in the Act is to be given the simple meaning as indicated. The Hon’ble High Court had observed that in respect of transfer of leasehold rights, transferee was put in possession and was enjoying the property as a lease-holder. Transfer could be said to have been effected on the date of execution of the conveyance document, it cannot be held that the transfer was effected on the date on which the document was copied out in the books of Registrar.

The Tribunal noted that in the instant case, stamp papers were purchased on or before 30.03.2013, the transferor and transferee both had put signature on the sale deed on 30.03.2013. Therefore, it opined that section 56(2)(vii)(b) of the Act was not applicable in case of the appellant.

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