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TMI Blog2017 (5) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts, it continued to claim the maintenance expenses as business expenditure. Even otherwise also from the date of conversion of the asset it was held as capital asset in the hands of the assessee for less than 36 months. CIT (A) rightly held the asset as short term capital asset and the gains should be taxed as short term capital gains since the holding period was less than 36 months from the date of conversion of stock in trade in to the capital asset. Accordingly, we uphold the order of the Ld. CIT (A) and dismiss the assessee's appeal. - ITA No. 2774/Mad./2016 - - - Dated:- 22-2-2017 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER A.S. Sriraman, Adv. for the Appellant. V. Nanda Kumar, JCIT for the Respondent. ORDER D.S. Sunder Singh, Accountant Member - This is an appeal filed by the assessee against an Order dated 04.07.2016 of Commissioner of Income Tax (Appeals)-1, Chennai, in ITA No. 220/07-08/A.III for the AY 1997-98. 2. All the grounds of the appeal are related to date of reckoning of acquisition of the property for the purpose of computation of capital gains. The assessee is dealing in real esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.08.1997 u/s. 21 of Company's Act and the amendment of object clause III(A) was made by including clause III(A) 5 of section 17 of Companies Act and resolved to carry on various other business activities including the textile business which the assessee is carrying on at present. Therefore, the AO is of the view that the company can treat the stock in trade as investment only from the FY 1997-98 but not for the earlier years. Accordingly, the AO rejected the claim of the assessee. The Ld. CIT (A) held that since the assessee was converted the stock in trade to investment during the FY 1994-95 relevant to the AY 1995-96. The period of holding for the purpose of capital gains should be reckoned from the AY 1995-96 and as a result, the period of holding was less than 36 months since the asset was sold during the FY 1996-97 relevant to the AY 1997-98 and the Ld. CIT (A) held that the resultant capital gains should be short term capital gains. 5. Appearing for the assessee, Mr. Sriraman, Advocate, argued that the company was incorporated for carrying out the real estate business and purchased two properties at No. 107, G.A. Road on 31.01.1990 for ₹ 8,47,976/-, on 09.03.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of art. Explanation :- For the purposes of this sub-clause, jewellery includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel ; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel ; (iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset ; (e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such right by the company or institution, as the case may be, making such offer ; (f) in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset ; (g) in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee ; (h) in the case of a capital asset, being trading or clearing rights of a recognised stock exchange in India acquired by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ITO [2009] 27 SOT 39 considered the identical issue and held that the date of conversion of stock in trade is the date for reckoning the holding period for determining the Long term capital asset. 7.1 Catchwords from that decision-Section 45, read with sections 2(29A) and 2(42A) of the Income-tax Act, 1961 - Capital gains - chargeable as - Assessment year 2003-04 - Whether for ascertaining as to whether a capital asset is a 'short-term capital asset' or a 'long-term capital asset', period for which said asset is held by assessee as capital asset alone has to be reckoned - Held, yes - Assessee company was engaged in business of developing and selling freehold immovable properties - In financial year 1998-99, assessee company acquired a property i.e. land for a certain consideration and same was subjected to development in financial years 2000-01 and 2001-02 incurring certain expenditure - Cost of acquisition of said property along with development expenditure incurred in respect thereof was shown by assessee company as its stock in trade in balance sheet up to 31-3-2002 - As on 1-4-2002 said property was converted by assessee company into investment and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n real estate and all the expenses have been claimed regularly as business expenses and have been allowed too. During the A.Y 1997-98 also the assessee has also paid MMDA plan submission charges of Rs,15300/- and claimed as deduction. The above finding of the AO shows that though the assessee claimed to have converted the asset in to investment in books of accounts, it continued to claim the maintenance expenses as business expenditure. Even otherwise also from the date of conversion of the asset it was held as capital asset in the hands of the assessee for less than 36 months. The Ld. CIT (A) held the asset as short term capital asset placing reliance on coordinate bench decision in the case of Lohia Metals (P.) Ltd. v. Asstt. CIT [2010] 131 TTJ (Chennai) 472 . The coordinate bench in the case cited (supra) held that the holding period prescribed in s. 2(42A) of the Act has to be reckoned when the asset i.e., shares became capital asset. The Ld. A.R relied on the decision of ITAT, Chennai 'D Bench decision in the case of Vinay Sawhany (supra). The coordinate bench delivered the ruling placing reliance on ITAT, Pune Third Member decision in the case of Kalyani Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X
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