TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the industrial land was converted into stock-in-trade in financial year 2002-03 or only in financial year 2006-07 for the purpose of section 45(2) of the Income-tax Act, 1961; (ii) Whether the fair market value of the land as on 01.04.1981 should be taken at Rs. 100 per sq. yd., Rs. 190 per sq. yd., or requires fresh verification having regard to the saleable and unsaleable area.
Issue (i): Whether the industrial land was converted into stock-in-trade in financial year 2002-03 or only in financial year 2006-07 for the purpose of section 45(2) of the Income-tax Act, 1961.
Analysis: The land was held as a capital asset for decades and continued to be reflected as such in the accounts and wealth-tax returns for the relevant intervening years. The ruling in the assessee's own earlier matter was relied upon to hold that section 45(2) applies only when the owner performs a positive act of conversion of a capital asset into stock-in-trade or treats it as such. Mere application for change of land use or steps taken to facilitate sale did not amount to conversion. On the record, the change in character was found to have occurred only in financial year 2006-07.
Conclusion: The land was not converted into stock-in-trade in financial year 2002-03 and section 45(2) was held to apply only from financial year 2006-07, in favour of the assessee.
Issue (ii): Whether the fair market value of the land as on 01.04.1981 should be taken at Rs. 100 per sq. yd., Rs. 190 per sq. yd., or requires fresh verification having regard to the saleable and unsaleable area.
Analysis: The valuation adopted by the revenue authority at Rs. 20 per sq. yd. was rejected, since the assessee's land was not shown to fall within the stated UPSIDC rate area. The circle rate of Rs. 100 per sq. yd. was accepted as a base, but the assessee's case for enhancement was found to have force because substantial portions of the land were to be transferred free of cost for common amenities and therefore the reduced saleable area had to be factored into valuation. As the additional material regarding transfer of common areas had not been examined by the lower authorities, the valuation issue required fresh consideration by the Assessing Officer.
Conclusion: The valuation was not finally fixed at Rs. 190 per sq. yd.; the issue was remitted for fresh determination with appropriate weightage for the unsaleable area, in favour of the assessee for statistical purposes.
Final Conclusion: The assessee succeeded on the principal section 45(2) controversy, while the valuation dispute was restored for limited reconsideration, and the departmental appeals failed.
Ratio Decidendi: For section 45(2) to apply, conversion of a capital asset into stock-in-trade must be shown by a positive act of the owner, and valuation for capital gains must reflect the real market effect of compulsory unsaleable/common areas where supported by evidence.
TaxTMI 
