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TMI Blog2016 (1) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the income generated from the development of IT Park to be considered as capital gains which is not appropriate. In our opinion, the entire issue has to be relooked by the Assessing Officer so as to apply the provisions of sec. 45(2) of the Act and he has to compute the income upto the date of conversion as income from capital gains and thereafter income has to be computed as income from business. The stand of the assessee right from the beginning and even now before us that capital asset in question are its investment and any gain on sale is capital gain and not business. This is not based on any sound principles. The assessee has converted the property as stock-in-trade in the year 2005 when it entered into an agreement with Proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Road, Pallikaranai and the land and building of which was acquired by the assessee company in 1999 at the time of demerger of MPL Parts Services Pvt. Ltd. by means of a transfer deed duly registered on 03.11.1999. During the assessment year 2008-09 relevant to the financial year ending 31-03-08, the assessee has sold a part of the said land after constructing thereon a IT Park called MPL Infinity. The construction of the said building appears to have started in 2006 after obtaining CMDA permission and after demolishing this service centre. The said building along with proportionate land was sold on 05/01/2008 to M/s. Chemoil and M/s. California Software Pvt. Ltd. (nominee of Chemoil). 4. The Assessing Officer treated the income offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay while the real estate sector was in a boom which is nothing but a business activity. 6) Even before the sale of the IT Park-I in the year 2008 the appellant had not only constructed IT Park-II known as MPL Silicon Towers, but had entered into Develop Agreements with the Purchasers wherein the assessee is stated as a Developer. 5. On appeal, the CIT(A) observed that the assessee purchased the property in the year 1999 to carry on the business of dealership of Ford Car and running a service centre for the same. It was not the intention to resell the property. The assessee acquired the property and only because of lull in the business the assessee was forced to sell the property so as to realize the income. According to him, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket and need for Information Technology sector, decided to shift the workshop and service center to a rented premises and construct an IT Park. The assessee has shown the construction of the building as capital workin- progress and the project expenses as direct expenses. The assessee got planning permission from CMDC and NOC from various Departments to start IT Park and also primarily work started in 2005. The assessee entered into agreement with a Project Engineer in the year 2005 for the purpose of construction of IT Park. So the intention of the assessee in the year 2005 was to develop an IT Park. It means that in the year 2005, the assessee converted its investment into stock-in-trade. There was no restriction for the assessee to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sec. 48 of the Act. Full value of consideration is the fair market value of the said capital asset on the said date of conversion. The above provision provided for the computation and it is done in two steps. Firstly market value as on the date of the conversion has to be ascertained in respect of the property sold during the year. The difference between the market value of the property and the cost of acquisition has to be assessed under the head capital gains. The second step is to find out business income for finding out the difference between the sale price and the market price on the date of conversion of the stock-in-trade. 7. In the present case, admittedly, the assessee, the owner of the capital asset converted the same into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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