The Delhi bench of the Income-tax Appellate Tribunal (ITAT) has ruled in favor of a non-resident Indian (NRI) in a case involving the underpayment of stamp duty related to the purchase of a flat in Mumbai. The assessing officer (AO) had imposed additional tax liability on the NRI by inflating his income due to alleged underpayment of stamp duty.
Shyamkumar Madhavdas Chugh, residing in Sharjah, United Arab Emirates (UAE), bought a flat in West Mumbai for Rs 1.82 crore, with the sale agreement executed on June 21, 2010. Although the payment period was extended over three years, ending on August 14, 2013, the registration occurred on August 13, 2013.
The AO contended that Chugh underpaid stamp duty since the value of the flat had appreciated to Rs 2.2245 crore during the payment period, resulting in an alleged difference amount of Rs 40.45 lakh. Chugh argued that he had paid stamp duty based on the agreed consideration value of Rs 1.82 crore, which was higher than the initial stamp duty value of Rs 1.40 crore in 2010.
The AO’s order, dated January 31, 2023, under section 147, was challenged by Chugh, who disagreed with the addition of Rs 40.45 lakh to his income. Chugh highlighted that the provisions of section 56(2)(vii)(b)(ii) were recommendatory and not mandatory, as indicated in a draft order from March 27, 2022.
The ITAT, after hearing both parties, concluded that the circumstances of the case prevented the application of relevant provisions of the law. It was determined that the first and second provisos applied since the agreement fixing the consideration amount was made in 2010, with partial payment made by cheque before the agreement date. Consequently, the stamp value at the time of the agreement in 2010 was considered valid by the ITAT.