Property treated as stock in trade, not capital asset - Section 50C not applicable. Appeal dismissed, CIT(A)'s decision upheld.

The Tribunal confirmed that the property in question was treated as stock in trade, not a capital asset, hence Section 50C of the Income-tax Act did not apply. The department's appeal was dismissed, and the CIT(A)'s decision was upheld.

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Issues Involved:
1. Determination of whether the property under consideration is a capital asset subject to Section 50C of the Income-tax Act.

Detailed Analysis:

Issue 1: Determination of whether the property under consideration is a capital asset subject to Section 50C of the Income-tax Act.

Relevant Facts:
- The assessee sold a property for Rs. 12,85,000 to M/s Jajodia and Patel Properties, while the market value as per stamp duty valuation was Rs. 4,99,50,000.
- The Assessing Officer (AO) questioned why capital gains should not be computed as per Section 50C of the Income-tax Act.
- The assessee contended that the property was purchased for development purposes, which is the business of the assessee, and thus treated as stock in trade, not a capital asset.

Assessee's Arguments:
- The property was acquired along with other family members in 1992 and 1993.
- The property was always treated as stock in trade, not a capital asset, and thus Section 50C should not apply.
- The property was in litigation, and the assessee never received possession.
- The rights to acquire the property were transferred to M/s Jajodia and Patel Properties due to prolonged litigation.

Assessing Officer's Findings:
- The property was not reflected in the trial balance for the financial year 2005-06, indicating it was not considered stock in trade.
- The assessee was in possession of the property, as evidenced by a letter from the assessee's advocate.
- The transfer of property to M/s Jajodia and Patel Properties was to avoid prolonged litigation, but one of the partners was the assessee's son, indicating a non-arm's length transaction.
- The property was fully paid for, and the transfer was a sale of the property, not just rights, thus avoiding higher stamp duty and capital gains tax.

CIT(A)'s Decision:
- The rights in the property were held as stock in trade, not capital assets.
- The property was part of the assessee's business as a developer, consistently treated as stock in trade.
- The valuation report by the DVO supported the assessee's claim, considering the property was under multiple litigations and encumbrances.
- The AO's assertion that the property was a capital asset was contrary to the facts on record.
- The provisions of Section 50C apply only to capital assets, not stock in trade.

Tribunal's Findings:
- The property was disclosed in trial balances as stock in trade from 2000-01 to 2005-06.
- The property was affected by numerous litigations, and the assessee did not have possession.
- The agreements were on stamp paper and not registered, indicating no valid transfer of rights.
- The assessee treated the property as stock in trade, and Section 50C does not apply to stock in trade.
- The sale value as per the agreement dated 16th June 2006 was genuine.

Conclusion:
- The Tribunal upheld the CIT(A)'s decision that the provisions of Section 50C are not applicable to the property under consideration as it was treated as stock in trade.
- The appeal of the department was dismissed.

Order Pronouncement:
- The order was pronounced in the open Court on 23rd August, 2013.

In summary, the Tribunal confirmed that the property in question was stock in trade and not a capital asset, thus Section 50C of the Income-tax Act was not applicable. The department's appeal was dismissed, and the CIT(A)'s order was upheld.

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