Summary: The Income-Tax Appellate Tribunal (ITAT) in Mumbai recently ruled in favor of a taxpayer involved in jointly purchasing a flat. This ruling concerns Rs 24.3 lakh, representing her share of the difference between the agreed property value in the allotment letter and the higher stamp duty value during later registration.
Property Transaction Norms: Typically, in property transactions, buyers finalize the purchase price, recorded in an allotment or agreement letter. Payments occur incrementally until the official property registration, which often incurs higher stamp duty charges.
Taxation Dispute: Tax authorities previously viewed the difference between the agreed property value and the higher stamp duty value during registration as taxable income. This interpretation resulted in significant tax demands and penal interest for many buyers.
Applicable Tax Law and Case Details: Under Section 56(2)(vii)(b) of the Income Tax Act, the ITAT ruled that the property’s value at the agreement date should be considered for taxation, not the higher value during registration. Rekha Singh contested the inclusion of Rs 24.3 lakh in her income for 2014-15, arguing that the allotment letter should serve as the agreement date.
ITAT Decision and Implications: The ITAT emphasized the property’s joint ownership nature, disregarding the source of pre-registration payments. This decision aligns with prior rulings favoring taxpayers in similar cases, providing relief regarding taxation discrepancies in property transactions.
This revised version seeks to adhere more closely to the principles outlined in the AP style guide, focusing on concise and factual reporting while maintaining the essence of the information provided.
(Source: ET Realty)