ITAT: Tax Provisions U/S 50C Applicable to the Seller, Not to Property Buyer

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the provisions of section 50C of the Income Tax Act, 1961 shall be subjected to be applied merely to the seller of the property and not to the buyers.

The concern would be the taxpayer firm is a limited liability partnership firm who have been involved in the real estate developers business and the other activities concerned to others. The taxpayer firms incur the investment via buying the property in N-94, Panchsheel Park, New Delhi for Rs.4,50,00,000 for the year, which was duly shown in the sale deed submitted to the assessing officer and duly recorded in the books of the taxpayer’s firms.

A stamp duty of Rs 72,05,000 would be paid by the taxpayer on the value of the property that is arrived via the registrar of the documents for the stamp duty value purpose. During the processing of the return, the council sees that if the situation of the distress sale would not be explained via the record hence the sale consideration of Rs 4,50,00,000 cannot be accepted.

A Two-Member-bench comprising Sh. Anil Chaturvedi, Accountant Member, and Sh. Anubhav Sharma, Judicial Member sees, the related Section 50C could not be invoked as the mentioned section would be subjected to be applied for the case of the seller of the property only while the petitioner would be the buyer.

Section 56(2)(vii)(a) and Section 56(2)(vii)(b) of the Act would indeed not be subjected to be applied for the case of a partnership firm or LLP and the taxpayer is an LLP. Section 56(2)(x) that might be subjected to be applied for the case of a partnership firm or LLP was effective from A.Y. 2018-19 while the current case corresponds to the A.Y. 2015-16.

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Therefore in the absence of the law presumption the Ld. AO was liable to build the definite proof, the buyer would have made more payment compared to the mentioned in the sale deed. The situation of the distress sale would be on the record and no attempt of Ld. AO to discredit that. The Ld CIT(A) considered the aspects and permits the relief of the deletion and there shall be no interference would be needed.