Shri Satendra Koushik v ITO (ITA No. 392/JP/2019 dated 23.04.2019)
Tax payer purchased Land vide a registered purchase deed for consideration of Rs. 15 lakhs. The land was reflected as Stock-in-trade by the tax payer
The stamp duty value of the said land was Rs. 49,23,542. During the course of assessment proceedings, the AO treated difference of Rs. 34,23,542/- i.e. between stamp duty value and purchase price as deemed income of the assessee u/s. 56(2)(vii)(b)(ii). CIT(A) upheld AO’s order.
Tax Payer’s contentions:
Tax payer is engaged in real estate business and regularly deals in sale and purchase of lands and buildings and hence provisions of section 56(2)(vii)(b)(ii) are itself not applicable.
As per the Explanation (d) of section 56(2)(vii), the term ‘property’ is defined to mean only capital asset which inter-alia includes immovable property being land or building or both.
The provisions of section 56(2)(vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income. The provisions were intended to extent the tax net to such transactions in kind.
The intent is not to tax the transactions entered into in the normal course of business or trade, the profits of which are taxable under specific head of income.
Therefore, the definition of property has been amended to provide that section 56(2)(vii) will have application to the ‘property’ which is in the nature of a capital asset of the recipient and therefore would not apply to stock-in-trade, raw material and consumable stores of any business of such recipient.