Section 50C cannot be applied to stock in trade; sale proceeds are taxable as business income, not capital gains.

Section 50C did not apply to the sale of land held as stock in trade, because the asset was treated in the books as a trading asset, sold in the ordinary course of business, and the profit was assessable as business income rather than capital gains. The Tribunal also noted that the consideration adopted by the Assessing Officer was not shown to have been actually received, and the transactions were covered by prior sale agreements with possession already handed over. As section 50C operates only for capital assets under sections 45 to 49, and section 43CA was inserted later to address business assets, the addition was deleted and the assessee's claim was upheld.

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Issues: Whether addition of alleged long-term capital gain by invoking section 50C could be sustained where the land sold was held as stock in trade and the profit was assessable as business income.

Analysis: The land was treated in the assessee's books as trading asset and was sold in the ordinary course of business. The Tribunal found that the consideration mentioned by the Assessing Officer was not proved to have been actually received, and that the transactions were covered by prior sale agreements with possession having been handed over earlier. Section 50C applies to computation of capital gains in respect of transfer of capital assets under sections 45 to 49 of the Income-tax Act, 1961, whereas business income is computed under sections 28 to 44. The later insertion of section 43CA with effect from 1 April 2014 also indicated that, for the relevant assessment year, deemed stamp valuation could not be applied to business assets in the manner sought by the Revenue.

Conclusion: Section 50C was held inapplicable to the sale of stock in trade, and the deletion of the addition was upheld in favour of the assessee.

Ratio Decidendi: Deemed stamp duty valuation under section 50C cannot be applied to profits arising from sale of stock in trade, as such profits are taxable as business income and not as capital gains.

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