Retrospective effect to provisions of section 56(2)(vii)(b) of Income Tax Act unjustifiable

Arvinder kaur Vs ITO (ITAT Delhi)

ITAT Delhi held that provisions of Section 56(2)(vii)(b) of the Income Tax Act Act which were introduced in the Act by Finance Act, 2010 cannot be given retrospective effect.

Facts- The dispute between the revenue and the assessee arises out of transfer of a plot in favour of the assessee by one Sri Charan Singh. The assessee claimed before the Ld. AO, that it was a gift made to her on 15.04.2009 by her maternal uncle who had executed a gift deed on 15.04.2009. It was claimed by the assessee that as authorities were not transferring the property merely on the basis of gift, the maternal uncle had also executed agreement to sell without possession dated 13.05.2009, a notarized Will dated 25.03.2009 and also executed registered GPA dated 13.05.2009. Subsequently, the transfer deed was executed on 23.10.2010 by Sri Ravinder Singh the GPA of Sri Charan Singh, the maternal uncle of the assessee.

AO has rejected the claim of gift in the light of provisions of Section 56(2)(vii)(b) of the Act which were introduced in the Act by Finance Act, 2010, with retrospective effect from 01.10.2009. AO had considered this transfer to be a deemed gift/ income in the hands of assessee valuing it for Rs. 1,23,88,000/- on the basis that at the time of execution of transfer deed on 23.03.2010, the stamp duty value paid was Rs. 1,27,88,000/- and reducing Rs. 4,00,000/- the sale consideration, shown to be paid in the transfer deed. AO also concluded that the assessee had failed to explain the source of payment of Rs. 4,00,000/- and it was added the income as investment out of undisclosed source.

Conclusion- In the context of “deemed gift” on the basis of inadequate consideration, the series of documents executed between the assessee and her maternal uncle indicate that the transaction was Gift only and had completed before 01.10.2009. So the provisions of Section 56(2)(vii)(b) of the Act which were introduced in the Act by Finance Act, 2010, with retrospective effect from 01.10.2009 are wrongly applied. Transfer Deed of lease hold rights executed and registered on 23.10.2010 was merely documents whose execution became necessary for creating a legal title. Assessee cannot be put to disadvantage on basis of this documents dated 23/10/2010, so as to say that there was transfer of interest on this date only.

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