I bought flats slightly below the stamp duty value and the Assessing Officer has added the difference in my hands under section 56(2)(vii)(b). There is no tolerance band in that clause. Can I still claim the section 50C margin?
The Tribunal held that you can. It read the exception in the third proviso to section 50C(1), and the corresponding exception in section 56(2)(x)(b)(B) and the first proviso to section 43CA, into section 56(2)(vii)(b)(ii), on the reasoning that the buyer and the seller stand on the same footing and there cannot be two different fair market values for the same property. It then applied a ten per cent margin to AY 2015-16, holding the Finance Act 2018 amendments curative and beneficial and therefore retrospective, and deleted the whole addition of Rs.23,30,694.
Decided by the ITAT (Shri Saktijit Dey, Judicial Member and Shri S. Rifaur Rahman, Accountant Member) on 2021-09-14, reported as I.T.A. No. 6912/Mum/2019; Assessment Year 2015-16 (ITAT Mumbai 'E' Bench). It bears on section 56(2)(vii)(b), section 56(2)(x), section 50C, section 50C(1), section 43CA, section 48 of the Income Tax Act 1961, in Capital Gains, Gifts, Shares & Angel Tax and How Tax Law Is Read matters.
This is the clearest statement in the reported Tribunal material that the same transaction is taxed at both ends and that the relief has to move with it. Section 50C charges the seller, section 43CA charges a seller holding stock in trade, and section 56(2)(vii)(b) — for transactions between 1 October 2009 and 1 April 2017 — and section 56(2)(x) thereafter charge the buyer. The tolerance exception was inserted into three of those four by the Finance Act 2018 with effect from AY 2019-20 and left out of section 56(2)(vii)(b) only because that clause had already ceased to apply to transactions after 1 April 2017. The Tribunal treated that omission as an accident of drafting rather than a deliberate denial. Two cautions. First, the year and the band: the third proviso was inserted by the Finance Act 2018 at five per cent with effect from AY 2019-20 and raised to ten per cent by the Finance Act 2020 with effect from AY 2021-22; this order applies ten per cent to AY 2015-16, which is doubly retrospective. Second, the retrospectivity holding is the contested part. The Tribunal itself said the issue is no more res integra because benches have consistently taken that view, but the departmental representative argued the opposite and other benches have held the corresponding section 43CA proviso prospective.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The assessee, an individual trading in imitation jewellery, purchased four office or flat units in AY 2015-16. Agreements for all four were dated 30 December 2014; three were registered on 13 January 2015 and one on 22 January 2015. The declared consideration in each case was below the stamp duty value, the shortfalls being Rs.1,42,000, Rs.63,500, Rs.11,000 and Rs.21,14,194, aggregating Rs.23,30,694. The Assessing Officer added that sum under section 56(2)(vii)(b)(ii). The assessee explained that the difference arose from the delay between the agreement date and registration. The CIT(A) rejected the claim to the tolerance band on two grounds — that section 56(2)(x) applies only from AY 2019-20, and that in respect of one property the difference exceeded five per cent. On the assessee's computation the variation was about one per cent for the first, 1.43 per cent for the second, 0.99 per cent for the third and nine per cent for the fourth. The departmental representative argued that there is no provision like the third proviso in section 56(2)(vii)(b)(ii) and that in any event it could not apply retrospectively.
The addition of Rs.23,30,694 was deleted and that ground allowed; the appeal was partly allowed, a separate ground on cost of acquisition being rejected. Section 56(2)(vii)(b)(ii) has to be harmoniously construed with sections 50C, 56(2)(x) and 43CA, and the exceptions provided in those three provisions read into it, because the omission of a similar exception from section 56(2)(vii)(b)(ii) is explained solely by that clause having been confined to transactions between 1 October 2009 and 1 April 2017 (paragraph 15). The assessee is therefore eligible to the benefit of a ten per cent margin, and if the variation falls within ten per cent no addition can be made (paragraph 16). A benefit given to the seller in respect of marginal variation cannot be denied to the buyer, since they stand on the same footing (paragraph 17). The exceptions introduced by the Finance Act 2018 with effect from 1 April 2019 are curative and beneficial and therefore apply retrospectively (paragraph 18).
The Tribunal traced the statutory scheme: section 50C charging the seller; section 56(2)(vii)(b) inserted by the Finance Act 2013 with effect from 1 April 2014 bringing the buyer to par with the seller; section 56(2)(vii) confined by the Finance Act 2017 to transactions between 1 October 2009 and 1 April 2017 with section 56(2)(x) taking over thereafter; section 43CA introduced by the Finance Act 2013 for assets other than capital assets; and the Finance Act 2018 inserting a marginal-variation exception into section 50C(1), section 56(2)(x)(b)(B) and the first proviso to section 43CA with effect from 1 April 2019, later enhanced from five to ten per cent by the Finance Act 2020 (paragraphs 9 to 13). From that conjoint reading it drew the legislative intention that wherever the statute substitutes the stamp valuation authority's value, an exception is provided for marginal differences (paragraph 14), and held that the reason no exception was written into section 56(2)(vii)(b)(ii) was 'patent and obvious' — the legislature did not feel the necessity because that clause applied only to a closed period — so the omission cannot be held against the assessee (paragraph 15). On parity it relied on the coordinate bench in Shri Sandip Patil v ITO that there cannot be two different fair market values for the same property, one in the seller's hands and one in the buyer's (paragraph 17). On retrospectivity it followed Sandip Patil and Maria Fernandes Cheryl (paragraph 18).
It is further relevant to observe, section 50C or for that matter section 56(2)(vii)(b)(ii) are identical provisions. Only difference being, 50C is applicable to the seller of an immovable property, whereas, the later provision is applicable to the buyer of the property. Therefore, a benefit given to a seller of the property in respect of marginal variation cannot be denied to the buyer of the property, since, they stand on the same footing.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppThe Tribunal held that you can. It read the exception in the third proviso to section 50C(1), and the corresponding exception in section 56(2)(x)(b)(B) and the first proviso to section 43CA, into section 56(2)(vii)(b)(ii), on the reasoning that the buyer and the seller stand on the same footing and there cannot be two different fair market values for the same property. It then applied a ten per cent margin to AY 2015-16, holding the Finance Act 2018 amendments curative and beneficial and therefore retrospective, and deleted the whole addition of Rs.23,30,694. This was decided by the ITAT (Shri Saktijit Dey, Judicial Member and Shri S. Rifaur Rahman, Accountant Member) and bears on section 56(2)(vii)(b), section 56(2)(x), section 50C, section 50C(1), section 43CA, section 48 of the Income Tax Act 1961. It is reported as I.T.A. No. 6912/Mum/2019; Assessment Year 2015-16 (ITAT Mumbai 'E' Bench). This is the clearest statement in the reported Tribunal material that the same transaction is taxed at both ends and that the relief has to move with it. Section 50C charges the seller, section 43CA charges a seller holding stock in trade, and section 56(2)(vii)(b) — for transactions between 1 October 2009 and 1 April 2017 — and section 56(2)(x) thereafter charge the buyer. The tolerance exception was inserted into three of those four by the Finance Act 2018 with effect from AY 2019-20 and left out of section 56(2)(vii)(b) only because that clause had already ceased to apply to transactions after 1 April 2017. The Tribunal treated that omission as an accident of drafting rather than a deliberate denial. Two cautions. First, the year and the band: the third proviso was inserted by the Finance Act 2018 at five per cent with effect from AY 2019-20 and raised to ten per cent by the Finance Act 2020 with effect from AY 2021-22; this order applies ten per cent to AY 2015-16, which is doubly retrospective. Second, the retrospectivity holding is the contested part. The Tribunal itself said the issue is no more res integra because benches have consistently taken that view, but the departmental representative argued the opposite and other benches have held the corresponding section 43CA proviso prospective. If it applies to you, the first step is this: Identify which charging provision the department is using on the buyer: section 56(2)(vii)(b) for a purchase between 1 October 2009 and 1 April 2017, section 56(2)(x)(b) from 1 April 2017.
The assessee, an individual trading in imitation jewellery, purchased four office or flat units in AY 2015-16. Agreements for all four were dated 30 December 2014; three were registered on 13 January 2015 and one on 22 January 2015. The declared consideration in each case was below the stamp duty value, the shortfalls being Rs.1,42,000, Rs.63,500, Rs.11,000 and Rs.21,14,194, aggregating Rs.23,30,694. The Assessing Officer added that sum under section 56(2)(vii)(b)(ii). The assessee explained that the difference arose from the delay between the agreement date and registration. The CIT(A) rejected the claim to the tolerance band on two grounds — that section 56(2)(x) applies only from AY 2019-20, and that in respect of one property the difference exceeded five per cent. On the assessee's computation the variation was about one per cent for the first, 1.43 per cent for the second, 0.99 per cent for the third and nine per cent for the fourth. The departmental representative argued that there is no provision like the third proviso in section 56(2)(vii)(b)(ii) and that in any event it could not apply retrospectively. The matter was decided on 2021-09-14 by the ITAT (Shri Saktijit Dey, Judicial Member and Shri S. Rifaur Rahman, Accountant Member). On those facts the ITAT held as follows. The addition of Rs.23,30,694 was deleted and that ground allowed; the appeal was partly allowed, a separate ground on cost of acquisition being rejected. Section 56(2)(vii)(b)(ii) has to be harmoniously construed with sections 50C, 56(2)(x) and 43CA, and the exceptions provided in those three provisions read into it, because the omission of a similar exception from section 56(2)(vii)(b)(ii) is explained solely by that clause having been confined to transactions between 1 October 2009 and 1 April 2017 (paragraph 15). The assessee is therefore eligible to the benefit of a ten per cent margin, and if the variation falls within ten per cent no addition can be made (paragraph 16). A benefit given to the seller in respect of marginal variation cannot be denied to the buyer, since they stand on the same footing (paragraph 17). The exceptions introduced by the Finance Act 2018 with effect from 1 April 2019 are curative and beneficial and therefore apply retrospectively (paragraph 18).
The Tribunal traced the statutory scheme: section 50C charging the seller; section 56(2)(vii)(b) inserted by the Finance Act 2013 with effect from 1 April 2014 bringing the buyer to par with the seller; section 56(2)(vii) confined by the Finance Act 2017 to transactions between 1 October 2009 and 1 April 2017 with section 56(2)(x) taking over thereafter; section 43CA introduced by the Finance Act 2013 for assets other than capital assets; and the Finance Act 2018 inserting a marginal-variation exception into section 50C(1), section 56(2)(x)(b)(B) and the first proviso to section 43CA with effect from 1 April 2019, later enhanced from five to ten per cent by the Finance Act 2020 (paragraphs 9 to 13). From that conjoint reading it drew the legislative intention that wherever the statute substitutes the stamp valuation authority's value, an exception is provided for marginal differences (paragraph 14), and held that the reason no exception was written into section 56(2)(vii)(b)(ii) was 'patent and obvious' — the legislature did not feel the necessity because that clause applied only to a closed period — so the omission cannot be held against the assessee (paragraph 15). On parity it relied on the coordinate bench in Shri Sandip Patil v ITO that there cannot be two different fair market values for the same property, one in the seller's hands and one in the buyer's (paragraph 17). On retrospectivity it followed Sandip Patil and Maria Fernandes Cheryl (paragraph 18). In the words reproduced by the source cited on this page: "It is further relevant to observe, section 50C or for that matter section 56(2)(vii)(b)(ii) are identical provisions. Only difference being, 50C is applicable to the seller of an immovable property, whereas, the later provision is applicable to the buyer of the property. Therefore, a benefit given to a seller of the property in respect of marginal variation cannot be denied to the buyer of the property, since, they stand on the same footing." The decision followed or applied Maria Fernandes Cheryl v. ITO (ITA No. 4850/Mum/2019, 15 January 2021) — followed on retrospectivity; Shri Sandip Patil v. ITO (ITA No. 924/Bang/2019, 9 September 2020) — followed on parity between buyer and seller and on retrospectivity.
It was decided by the ITAT on 2021-09-14 and is reported as I.T.A. No. 6912/Mum/2019; Assessment Year 2015-16 (ITAT Mumbai 'E' Bench). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 56(2)(vii)(b), section 56(2)(x), section 50C, section 50C(1), section 43CA, section 48, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The addition of Rs.23,30,694 was deleted and that ground allowed; the appeal was partly allowed, a separate ground on cost of acquisition being rejected. Section 56(2)(vii)(b)(ii) has to be harmoniously construed with sections 50C, 56(2)(x) and 43CA, and the exceptions provided in those three provisions read into it, because the omission of a similar exception from section 56(2)(vii)(b)(ii) is explained solely by that clause having been confined to transactions between 1 October 2009 and 1 April 2017 (paragraph 15). The assessee is therefore eligible to the benefit of a ten per cent margin, and if the variation falls within ten per cent no addition can be made (paragraph 16). A benefit given to the seller in respect of marginal variation cannot be denied to the buyer, since they stand on the same footing (paragraph 17). The exceptions introduced by the Finance Act 2018 with effect from 1 April 2019 are curative and beneficial and therefore apply retrospectively (paragraph 18). It arises in Capital Gains, Gifts, Shares & Angel Tax and How Tax Law Is Read matters, on section 56(2)(vii)(b), section 56(2)(x), section 50C, section 50C(1), section 43CA, section 48 of the Income Tax Act 1961, and was decided by Shri Saktijit Dey, Judicial Member and Shri S. Rifaur Rahman, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute the variation property by property, not in aggregate. Here three of the four flats were within about one per cent and only the fourth was at nine per cent, and the CIT(A) had used the fourth to defeat the whole claim. If your year is before AY 2019-20, plead the retrospectivity point expressly and on its own reasoning — that the amendment is curative and beneficial — rather than assuming the band applies; and state which band, five or ten per cent, you are claiming and why. Run the parity argument in terms: the same property cannot bear one fair market value in the seller's hands and another in the buyer's, so a marginal-variation benefit given to the seller cannot be denied to the buyer. Keep the agreement-date argument alive alongside. Here the agreements were dated 30 December 2014 and registered in January 2015, and the assessee's primary case was that the value on the agreement date should govern.
Still good law. A citator search returns one later decision, and it is a genuine application: in Mahinder Pal v ACIT, Central Circle-2(1), Chandigarh (ITAT Chandigarh, 12 July 2022) the Bench recorded that 'the identical issue has been discussed at length by the Coordinate Mumbai Benches of the Tribunal in case of Joseph Mudaliar Vs. DCIT, CC-4(3), Mumbai', followed it, and deleted the addition because the 2.32% difference fell inside the tolerance band. A name search returns 37 documents; the High Court hits are unrelated family litigation between other Mudaliars and there is no section 260A appeal against this order. Nothing overruling, doubting or confining it was found. The point has since been put beyond doubt for later years by the statutory tolerance band in the third proviso to section 50C(1) and in section 56(2)(x), but this order remains the authority for reading it into section 56(2)(vii)(b) for AY 2015-16. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order runs to 26 numbered paragraphs. Paragraph 9 reproduces section 50C(1) with the third proviso in its Finance Act 2018 form at 'one hundred and five per cent' and describes it as introduced with effect from 1 April 2019; paragraph 13 then records that by the Finance Act 2020 the permissible variation was enhanced from five to ten per cent, and adds that in the case of section 43CA a further benefit was granted by enhancing the limit to 20 per cent. That last statement is stated here only as the Tribunal's observation and was not independently verified; the 20 per cent limit for section 43CA was a time-limited measure and its terms should be checked before use. Paragraph 9 also states that section 50C was introduced by the Finance (No. 2) Act 2009 with effect from 1 April 2010, which does not match the section's insertion by the Finance Act 2002 with effect from 1 April 2003; the sentence appears to be an error in the order and nothing in this entry rests on it. Paragraphs 16 and 17 were re-read verbatim through a fragment view. The order also decided a cost of acquisition ground (paragraphs 20 to 24) against the assessee, so the disposal is 'appeal is partly allowed'. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The addition of Rs.23,30,694 was deleted and that ground allowed; the appeal was partly allowed, a separate ground on cost of acquisition being rejected. Section 56(2)(vii)(b)(ii) has to be harmoniously construed with sections 50C, 56(2)(x) and 43CA, and the exceptions provided in those three provisions read into it, because the omission of a similar exception from section 56(2)(vii)(b)(ii) is explained solely by that clause having been confined to transactions between 1 October 2009 and 1 April 2017 (paragraph 15). The assessee is therefore eligible to the benefit of a ten per cent margin, and if the variation falls within ten per cent no addition can be made (paragraph 16). A benefit given to the seller in respect of marginal variation cannot be denied to the buyer, since they stand on the same footing (paragraph 17). The exceptions introduced by the Finance Act 2018 with effect from 1 April 2019 are curative and beneficial and therefore apply retrospectively (paragraph 18).
TaxSphere, “Joseph Mudaliar v DCIT (ITAT Mumbai) — the section 50C tolerance band read into the buyer's charge under section 56(2)(vii)(b), and applied to AY 2015-16”, https://taxnotice.vittsphere.com/caselaw/case/joseph-mudaliar-v-dcit-tolerance-band-read-into-the-buyers-charge/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The stamp authority accepted my sale deed at the agricultural land rate and passed a final order on it. The Assessing Officer has reopened on the basis that the open land rate should have applied. Can he assume a valuation above the one the stamp authority itself adopted?
The Tribunal orders say s.50C does not touch leasehold rights. Is that still safe advice?
I assigned my leasehold plot for less than the circle rate. Can the officer substitute the stamp duty value under s.50C?
The stamp duty value of the flat my client bought exceeds the price by about eight per cent. Is there a tolerance band, and what was it in the year of my assessment?
