Section 56(2)(x) property tax relief has helped a homebuyer avoid an Rs 11.35 lakh tax addition after the Kolkata bench of the Income Tax Appellate Tribunal ruled that the property’s circle value on the agreement date should be considered instead of the higher value at registration.
The taxpayer and her husband had entered into a registered agreement on January 22, 2021, to purchase an immovable property for approximately Rs 1.23 crore. They later executed the conveyance deed in September 2023, without changing the agreed purchase price. By then, the property’s stamp duty or circle value had risen to around Rs 1.462 crore.
The buyers had paid Rs 91 lakh through banking channels on or before the agreement date. According to the account reported by the Times of India and statements attributed to chartered accountant Suresh Surana, the original purchase price was consistent with the circle rate applicable in January 2021.
The transaction was subsequently selected for scrutiny. The Assessing Officer compared the higher stamp duty value prevailing at registration with the actual consideration of about Rs 1.23 crore and treated the difference as a benefit received by the buyers under Section 56(2)(x) of the Income Tax Act.
Under the provision, the difference between the stamp duty value and purchase consideration can become taxable in the buyer’s hands when it exceeds the higher of Rs 50,000 or 10% of the consideration. In this case, the gap was approximately Rs 22.71 lakh. Since the taxpayer owned half of the property, the Assessing Officer added around Rs 11.35 lakh to her taxable income under “Income from Other Sources”.
The taxpayer challenged the addition before the Commissioner of Income Tax (Appeals), arguing that the relevant valuation date should be the date of the registered purchase agreement rather than the later registration date. The CIT(A) rejected the argument and sustained the addition in an order dated March 31, 2026.
Before the Kolkata ITAT, the taxpayer relied on the provisos to Section 56(2)(x). These provisions address transactions where the date of the agreement determining the consideration differs from the date of registration. They permit the stamp duty value applicable on the agreement date to be considered, provided that at least part of the consideration is paid through prescribed banking or electronic channels on or before that date.
The Tribunal examined the registered purchase agreement and the later conveyance deed. The agreement recorded consideration of about Rs 1.235 crore, which reflected the circle value prevailing in January 2021, while the buyers had already paid Rs 91 lakh through banking channels. The Tribunal found that the later execution of the conveyance deed did not justify replacing the earlier circle rate with the higher valuation applicable on September 18, 2023.
The ITAT therefore deleted the Rs 11.35 lakh addition, overturned the CIT(A)’s order and allowed the taxpayer’s appeal. The ruling leaves the agreement date and documented banking payments as the decisive factors in this case.
