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TMI Blog2017 (4) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... by the revenue are as under:- ITA No. 454/JP/2012:- "1. Whether on the facts and circumstances of the case the CIT(A) Central, Jaipur has erred in law and on facts in deleting the addition of Rs. 14,55,022/- made by the AO on account of capital gain for conversion of capital asset in stock in trade. 2. Whether on the facts and circumstances of the case the CIT(A) (Central), Jaipur has erred in law and on facts in deleting addition of Rs. 15,00,906/- out of total addition of Rs. 17,00,906/- made by the AO on account of trading profit. ITA No. 455/JP/2012:- "1. Whether on the facts and circumstances of the case the CIT(A) (Central), Jaipur has erred in law and on facts in deleting the addition of Rs. 23,06,308/- made by the AO on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance to provisions of DEVELOPMENT AGREEMENT made with M/s Finetech Real Estate Developeers Pvt. Ltd on 08-01-2005, the conversion of the land at plot no. E-21, Mauji Colony, Malviya Nagar, Jaipur, for which the above said agreement made, into stock-in-trade is and be hereby confirmed as the Developer has submitted the drawings for construction to concern authorities." The assessee further submitted that subsequently, the accounting entry was passed in the books of accounts on 10.4.2005. Accordingly, the date of 10.04.2005 was taken as date of conversion of the capital assets into stock entry by the assessee. 2.2 The ld. CIT(A) observed that the stand taken by the Assessing Officer was not correct and the FMV of the asset for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution was passed. Accordingly, the land has to be shown as fixed assets as on 31.3.2005. Considering these facts and circumstances, and there being no contrary evidence brought out on record by the AO., the date of conversion of land into stock in-trade is to be taken as 10.4.2005 considering the Board's resolution dated 9.4.2005, as shown by the appellant. Accordingly, FMV has to be determined as on 10.4.2005 for the purpose of section 45(2). The DLC rate on 10.4.2005 was Rs. 9,000/- per sq.mt, whereas the appellant has taken the FMV @ Rs. 9,200/- per sq.mt, which is slightly more than the DLC rate. Therefore, there is no justification to disturb the FMV of the land so shown by the appellant. Hence, the addition on account of capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulating the business profit. Further, the Assessing Officer has held that the flats in the project has been sold at a rate much lower than even the DLC rate. Further, the Assessing Officer has challenged the profit sharing ratio of 18:82 as has been worked out between the assessee and the developer in terms of the development agreement for sharing the sale proceeds out of sale of flats. 3.2. In this regard, the relevant finding ld. CIT(A) are contained at para 3.4 of its order which is reproduced as under: "I have considered the submission of ld. AR and have perused the material on record. Normally any developer agreement between the land owner and the developer envisages contribution of the land by the land owner like that of appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown is quite less than the DLC rate and moreover also the defect that the sharing ratio of the appellant company is very low which is also not very justifiable and considering the application of decision of Hon'ble Supreme Court in the McDowell & Co. Ltd vs. CTO Ltd 154 ITR 148 and various other decisions cited by the A.O, it will be appropriate to estimate the business profit of the appellant after rejecting book results at Rs. 2 lakh for A.Y 2007-08 and Rs. 3 lakh for A.Y 2008-09 against the business loss of Rs. 13,24,168/- and Rs. 15,90,568/- shown by the appellant." 3.3. We have heard the rival submissions and pursued the material available on record. In terms of section 45(2) of the Act, fair market value of the asset converted into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding substitution of the land cost by fair market value of such land cost as on the date of conversion for the purposes of computing the business profits. In this regard, the Hon'ble Supreme Court in case CIT vs. Bai Shirinbai K. Kooka [1962] 46 ITR 86 has held that the assessable profit as business profit would be the difference between the sale price of stock-in-trade and Fair Market Value so converted/treated in/as stock-in-trade prevailing on the date when such conversion takes place. In instant case, we find that the AO while computing the business profits has not considered such fair market value on the date of conversion and further, has allowed only 18% of the cost of the land (considered while computing the capital gains u/s 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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