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TMI Blog2017 (4) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The A.O. further observed that the consideration shown in the sale deed is lesser than the guidance value of the property as per the sub-registrar value for the purpose of payment of stamp duty. Accordingly, the A.O. has worked out a sale consideration of ₹ 4,46,99,501/- and applied the provisions of section 50C of the Act for the purpose of computation of long term capital gain. We find that as per the provisions of section 50C of the Act, when the sale consideration shown in the sale deed is less than the guidance value of the property for the purpose of payment of stamp duty, the SRO value has to be considered as deemed consideration for the purpose of transfer of property. In this case, the assessee has executed sale deeds and the consideration agreed in the sale deed is less than the guidance value of the property. Therefore, we are of the view that the A.O. was right in computing the long term capital gain based on the guidance value of the property as per the SRO value. Cost of acquisition of the property - Held that:- Though, the assessee furnished a copy of registered document vide document no.2201 dated 25.3.1980, the A.O. observed that the document furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per Shri Manjunatha, Accountant Member This appeal filed by the revenue is directed against order of the CIT(A), Vijayawada dated 11.12.2012 and it pertains to the assessment year 2009-10. 2. The brief facts of the case are that the assessee is legal representative of her diseased husband Late Shri Pedarla Venkata Ramaiah. Late Shri Pedarla Venkata Ramaiah filed return of income for the assessment year 2009-10 on 31.3.2011 declaring total income of ₹ 2,71,92,150/- besides agricultural income of ₹ 1,60,000/-. The case has been selected for scrutiny through CASS, mainly for the reason to examine the sources of cash deposits in savings bank account. Notices u/s 143(2) 142(2) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished information as called for. During the course of assessment proceedings, the assessee was asked to furnish the sources for cash deposits in the savings bank account with ING Vysya Bank Limited. The assessee has furnished a statement explaining sources for all the deposits in the bank account. It was explained that the sources for cash deposits were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . further observed that since the agreement holder categorically disowned having entered into any agreement with the assessee, the assessee failed to prove the transaction with any other corroborative evidences to prove his case that he had entered into agreement for sale of agricultural land. The A.O. has listed out number of reasons to reject the purported sale agreement stated to be entered by the assessee. According to the A.O., the assessee himself has converted agricultural land into flats and sold to various buyers on different dates, but for the purpose of computation of capital gain, the assessee has created a fabricated agreement. The A.O. rejected all the claims made by the assessee to substantiate the agreement. According to the A.O., the agreement is unregistered and also un-possessory and the total consideration is paid by way of cash on various dates. Though the assessee stated to have received part of sale consideration by cheques, on verification of the details filed by the assessee, it is noticed that the two cheques claimed to have received from the assessee are actually received from the buyers of the flats, but not from the agreement holder, therefore, rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has shown the agricultural land in the previous financial year as its investment and converted investment into stock in trade, therefore, the provisions of section 45(2) of the Act is applicable. The A.O. observed that the property transferred by the assessee is a capital asset which was held by him as investment in its books of accounts, therefore, the provisions of section 45(2) of the Act has no application. The A.O. further observed that though the assessee has divided the land into flats and sold to different persons, the activity of the assessee does not come under adventure in the nature of trade or commerce to compute capital gain as well as business income on conversion of investment into stock in trade or vice-versa. With these observations, re-worked capital gain from sale of land by adopting value as per section 50C of the Act, by adopting guidance value of the SRO for the purpose of payment of stamp duty and computed long term capital gain of ₹ 4,39,59,996/-. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered. The procedure adopted by the A.O. lacks rhymes, reason, legitimacy and the same has to be deleted as the same is not in tune with the procedure laid down for this purpose. As per the material on record, it has to be held that the assessee has made outright sale of the impugned agricultural land of 5.11 acres to Shri P.V. Prasad for a consideration of ₹ 2,65,72,000/- on which long term capital gain accrues to the assessee for the year ending 31.3.2009. With these observations, directed the A.O. to re-compute long term capital gain based on the sale consideration received from sale agreement after reducing cost of acquisition of the property. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 10. The Ld. D.R. submitted that the Ld. CIT(A) erred in holding that the assessee has made outright sale of agricultural land of 5.11 acres to Shri P.V. Prasad for a consideration of ₹ 2,65,72,000/- without appreciating the fact that the A.O. has brought out clear evidences in the form of statements from Shri P.V. Prasad, wherein he has categorically denied having entered into agreement dated 3.12.2007 with the assessee. The D.R. further submitted that during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action should be assessed under the head income from business as well as capital gains as and when the flats are sold. The A.R. referring to the provisions of section 45(2) of the Act, submitted that when a capital asset is converted into stock in trade or vice-versa, it gives rise to capital gain as well as business income. Since, the assessee has converted his land into stock in trade, the provisions of section 45(2) of the Act has to be applied for the purpose of determination of income. The A.O. without assigning any reason rejected the claim of the assessee, simply stating that the assessee himself has computed long term capital gain from sale of lands. 13. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case which leads to the dispute is that the assessee has sold agricultural land measuring 5.11 acres and computed long term capital gain. The assessee claims that the he had entered into unpossessory sale agreement with Shri P.V. Prasad for a consideration of ₹ 2,65,72,000/- and received sale consideration by way of cash and cheque on various dates. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that the assessee failed to prove the unregistered sale agreement with necessary evidences to accept his claim that he has made outright sale of agricultural land to Shri P.V. Prasad. 15. Coming to sale consideration stated to be received from sale of land. The assessee claims to have received sale consideration of ₹ 2,65,72,000/- by cash as well as cheques on various dates. The A.O. has brought out a clear fact to the effect that the assessee himself has executed individual sale deeds in favour of the buyers of the flats and consideration has been directly paid to the assessee. The A.O. further observed that the consideration shown in the sale deed is lesser than the guidance value of the property as per the sub-registrar value for the purpose of payment of stamp duty. Accordingly, the A.O. has worked out a sale consideration of ₹ 4,46,99,501/- and applied the provisions of section 50C of the Act for the purpose of computation of long term capital gain. We find that as per the provisions of section 50C of the Act, when the sale consideration shown in the sale deed is less than the guidance value of the property for the purpose of payment of stamp duty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. The Ld. A.R. referring to the provisions of section 45(2) of the Act, submitted that section 45(2) of the Act, was enacted for computing capital gains in respect of transfer of asset that was converted into stock in trade of business. As per the provisions of section 45(2) of the Act, profit arising from the transfer, by way of conversion of investment into stock in trade shall be chargeable to income tax as income of the previous year in which such stock in trade is sold or otherwise transferred. Since, the assessee has converted his investment into stock in trade and formed flats, the provisions of section 45(2) of the Act, shall apply and accordingly, the A.O. ought to have re-computed the income from sale of agricultural land by applying the provisions of section 45(2) of the Act. 18. Having heard both the sides and considered material on record, we find that the A.O. never disputed the fact that the assessee has converted his investment into stock in trade. The A.O. denied alternative claim of the assessee, merely on the ground that the assessee himself has computed long term capital gain on sale of land under normal provisions of the Act. It is the claim of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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