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TMI Blog2017 (10) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... such stock-in-trade is to be brought to tax as business income in the year under consideration. As per the sale deed dated 18.07.2005, the land was sold to M/s Suncity Projects Pvt. Ltd. for a consideration of ₹ 7,57,00,000/- which was duly credited in the profit/loss account and offered to tax in the return of income after taking into consideration stock-in-trade of ₹ 5,65,58,400 and other business expenses. The ld. CIT(A) has also returned a finding that the assessee has offered a net profit of ₹ 1,13,02,091/- as business income in the return of income which has been accepted by the Revenue in the original assessment proceedings. In light of above discussions and in the entirety of facts and circumstances of the case, we donot see any infirmity in the order of the ld CIT(A) and the same is hereby confirmed. The ground of appeal of the Revenue is thus dismissed. Disallowance of amount paid to JVVNL on account of compounding charges - Held that:- As per letter dated 4.1.2006 of JVVNL, the assessee has paid an amount of ₹ 6,90,922 through cheque and an amount of ₹ 4,39,262 has been adjusted against bank guarantee, in total ₹ 11,30,184 has th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer noted that the original cost of land in the books of erstwhile partnership firm, Assam Roller Flour Mills was shown at ₹ 11,648/- and accordingly, he computed the indexed cost of acquisition at ₹ 55,910/- and after giving allowance for the same, brought to tax long term capital gains of ₹ 7,82,45,942/-in the hands of the assessee. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer and the relevant findings of the ld. CIT(A), which are under challenged before us, are contained at paras 4.1 and 4.2 of his order which are reproduced as under:- 4.1 I have duly considered the submissions of the appellant. The appellant is a limited company engaged in the business of real estate and financing. The appellant company had converted its own property i.e. land into stock in trade after valuation. The land measuring 7 bhiga and 9 biswa was valued at ₹ 5,65,58,400/- in AY 2005-06. During the year under reference, the said land was sold to M/s Suncity Projects Pvt Ltd for ₹ 7,57,00,000/- as per sale deed. The appellant company took the cost of acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of determining the fair market value of the land as on 01.04.1981. Therefore in view of these specific provisions, the appellant company had rightly claimed the benefit of indexation on the fair market value of the land as on 01.04.1981. Since the land was converted into stock in trade in AY 2005-06, the AO was not right in applying the provisions of section 50C in the present case. The land was appearing as stock in trade as on 01.04.2006 in the books of account. The capital gain/loss had already accrued to the assessee company in AY 2005-06 when the land was converted from capital asset to stock in trade as per the provisions of section 45(2). The profits on the sale of business asset held by the appellant would constitute business income and not short term capital gain. Since the income is being assessed as business income, the provisions of section 50C will not have any application as held by Hon ble Madras High Court in the case of CIT Vs Thiruvengadam Investment Pvt. Ltd. (320 ITR 345) and Hon ble Mumbai Tribunal in the case of Inderlok Hotels Pvt. Ltd. Vs ITO (122 TTJ 145). Therefore the AO was not justified in enhancing the sale consideration from ₹ 7,57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been converted into stock-in-trade of business carried on by the assessee as claimed by the assessee and upheld by the ld CIT(A). Where the answer to the said issue is in affirmative, whether the provisions of section 45(2) would be applicable and not the provisions of section 50C as invoked by the Assessing officer. In our view, the second issue is no more rest-integra in view of the decision of Hon ble Madras High Court in case of Thiruvengadam Investment Pvt. Ltd reported in 320 ITR 345. 7. A related issue which arise for consideration is determination of cost of acquisition and whether there is any infirmity in the order of ld CIT(A) where he has upheld the action of the assessee in taking cost of acquisition as on 1.4.1981 invoking the provisions of provisions of section 49(i)(iii)(a) read with section 55(2)(b)(ii). 8. Section 45(2) provides that Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in-trade and subsequently sold. 11. Further, it is noted that in compliance thereof, the assessee company has worked out long term capital loss of ₹ 4,52,640/- taking into consideration the full value of the consideration at ₹ 5,65,58,400/- as per valuation report dated 30.03.2005. The cost of acquisition was taken at ₹ 1,18,77,264/- as on 01.04.1981 as per valuation report dated 20.3.2005 and indexed cost thereof was computed at ₹ 5,70,11,040. Since the partnership firm was succeeded by the assessee company, the cost of acquisition was determined as on 1.4.1981 in terms of provisions of section 49(1)(iii)(a) read with section 55(2)(b)(ii) as the partnership firm acquired the land prior to 1.4.1981. Further, the ld AR drawn our attention to the show-cause notice issued by ld CIT u/s 263 and subsequent order dropping the said proceedings and submitted that the valuation as on 1.4.1981 so determined by the assessee at ₹ 1,18,77,264/- has been accepted by the ld CIT and there is nothing in the reassessment order where the AO has again disputed the said value. The valuation so determined as on 1.4.1981 based on the valuation report has thus not been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Principal due ₹ 15,134/- b. Charges due to non payment ₹ 15,788/- c. Compounding charges ₹ 11,00,000/- d. Principal Due ₹ 4,00,000/- e. Charges due to non payment ₹ 2,60,000/- Total ₹ 17,90,922/- The assessee company also submitted copy of minutes of Corporate Level Settlement Committee dated 12.05.2005. From the above, it was clear that the committee in its meeting held on 25.04.2005 approved the proposal. Therefore, the amount was determined/settled in the year under consideration, and deserved to be allowed. It was submitted that compounding charges were demanded by RSEB on the basis of three shifts working as meter was defective and correct consumption was not recorded. The assessee company disputed this and ultimately settlement was reached on the basis of two shifts working. Thus compounding charges were no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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