Agricultural Land’s Higher Stamp Value on NA Conversion Cannot Trigger Section 56(2)(x): ITAT Ahmedabad

Dhartivarsha Estate Holders Pvt. Ltd. Vs ITO (ITAT Ahmedabad)

Higher Stamp-Duty Value Resulting Solely from Conversion of Agricultural Land into Non-Agricultural Land Cannot Justify Addition Under Section 56(2)(x): ITAT Ahmedabad

Summary: The Ahmedabad Bench of the Tribunal has held that the difference between the stamp-duty value and the actual purchase consideration cannot mechanically be taxed under Section 56(2)(x) when the higher stamp value arose merely because the land was subsequently converted from agricultural to non-agricultural use, and the entire cost of such conversion was borne by the purchaser.

Facts of the case

The assessee, engaged in real-estate development, purchased certain parcels of land under a registered sale deed dated 08.06.2021 for ₹4.93 crore. The stamp-duty value of the property was, however, ₹15.91 crore. The Assessing Officer accordingly proposed to tax the difference of ₹10.98 crore under Section 56(2)(x).

The assessee explained that the agreement to purchase the lands had originally been entered into on 31.03.2011, when the lands were agricultural lands. A token advance of ₹25,332 had also been paid in cash at the time of the agreement.

The purchaser was not an agriculturist and could not directly purchase agricultural land under the applicable Gujarat land laws. It was therefore agreed that the sellers would first obtain conversion of the lands into non-agricultural lands. However, the entire expenditure, premium and other charges relating to such conversion were to be borne by the purchaser.