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TMI Blog2002 (12) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee had not been converted into stock in trade? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in rejecting the alternate claim of the assessee regarding the computation of capital gains on transfer of lands?" The assessment years are 1982-83 and 1983-84. The facts as stated in the statement of case are as follows: The assessee was a private limited company engaged in textile business. From the assessment year 1982-83, it claimed that it had started business in real estate by converting part of its vacant land into stock-in-trade to carry on the business of real estate. In order to prove the same, it was contended that a resolution to that effect was passed on January 1, 1981, and entries have been made in the books of account. It was also claimed that the proceedings of the resolution was recorded in the minutes, duly signed by the chairman, that the minutes so recorded were filed with the Registrar of Companies on January 11, 1983, that as per the entries made in the books of account, the property alleged to have been converted into stock-in-trade was valued at the market value of Rs. 35,90,000 and recorded in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession as on the date of resolution on January 1, 1981, to convert the same into stock-in-trade. The properties were sold under various agreements in the years 1969 and 1970. Some of the agreement holders filed suits for specific performance of the agreements. The sale deeds were executed pursuant to the agreements already entered into and also in discharge of the decree passed against the assessee. The Tribunal found that when the assessee was not in possession of the property in question, there is no question or possibility for the assessee converting the same into stock-in-trade. The Tribunal further found that the alleged conversion of the land into stock-in-trade was not genuine. The Tribunal also rejected the minutes projected by the assessee in order to prove the conversion on the ground that the minutes so produced had been entered on a loose sheet of paper and it is only an afterthought to avoid the liability of capital gains. The alternative claim of the assessee that part of the consideration had gone into discharging the mortgage debt and therefore to that extent, the consideration paid by the purchaser, which went into discharging mortgage debt has to be allowed as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard of directors or of every committee of the board, to be entered in books kept for that purpose within thirty days of the conclusion of every such meeting with their pages consecutively numbered. Each page of every such book shall be initialled and signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed in the case of minutes of proceedings of the meeting of the board or of a committee thereof by the chairman of the said meeting or the chairman of the next succeeding meeting. In the case of minutes of the proceedings of the general meeting by the chairman of the same meeting within the aforesaid period of thirty days or in the event of the death or inability of that chairman within that period by a director duly authorised by the board for that purpose. In no case, the minutes of the proceedings of the meeting shall be attached to any such book as aforesaid by pasting or otherwise. The minutes of each meeting shall contain a fair and correct summary of the proceedings. Hence, the Tribunal has recorded a finding that in view of the express provision under section 193 of the Companies Act, the minutes dated January 1, 1981, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were no income-tax arrears on the part of the assessee and apart from that, the certificate cannot be used to prove that the land in question was converted into stock-in-trade of the business. That apart, the Tribunal recorded a finding that there is no material to come to the conclusion as done by the Commissioner of Income-tax (Appeals) that the lands were divided into plots and thereafter sold. From the material records, the 31 sale deeds executed by the assessee show that the lands were not sold in terms of plots, but in terms of extent over an extent of 357.74 cents. It is also found by the Tribunal that the assessee was not in possession of the land, which was sold during the relevant previous year. All those lands were sold under various agreements of sale and the purchasers were given possession in the years 1969 and 1970 itself. This factual position clinches the issue when the assessee was not in actual possession of the properties and the properties were given in possession to the agreement holders in the years 1969 and 1970 itself, there was no question of converting the land into stock-in-trade by passing a resolution in the year 1981. Learned counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee that as most part of the sale consideration was paid for discharging the mortgage to the extent of payment made to South Indian Bank has to be treated as the cost of the land or expenditure in executing the sale deeds so as to take the said amount before computing the sale proceedings for capital gain. Here again, we are not able to accept the contention of learned counsel for the reason that the Tribunal has recorded a categoric finding that the assessee did not produce any evidence to show that the sale consideration was appropriated by the mortgagee bank and further found that from the material filed by the assessee in the gift-tax appeal that the mortgagee bank has released 3.71 acres of vacant property in T.S. No. 328, Tirupur town, from security and thereby giving a free hand to the assessee for the disposal of the same. When the final fact-finding authority has recorded a finding that there is no material to prove that the sale consideration has been paid for discharge of the mortgage amount, we have no material to go against that finding. Hence, the second question also has to be answered in the affirmative, against the assessee and in favour of the Revenue and we are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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