2022 (5) TMI 1083 - AT - Income Tax

Appeal partly allowed: No capital gain in A.Y. 2012-13. Land conversion claim rejected. Double taxation issue dismissed.

Babusha Haribhau Gade Versus The Income Tax Officer, Ward-12 (4), Pune

The appellant's appeal was partly allowed, determining that no capital gain was chargeable in A.Y. 2012-13 based on the Joint Venture Agreement. The claim ... Capital gain computation u/s 45 - JDA - conversion of land into stock-in-trade - Whether capital gain arisen in A.Y.2012-13 with reference to Joint-Venture agreement dated 28.09.2011? - assessee along with other co-owners had entered into Joint Venture Agreement - For calculating Long Term Capital Gain (LTCG), assessee considered value as total consideration, which is the value considered for stamp duty valuation, by the Stamp duty authorities - Assessee claimed that his share is 1/3rd and calculated the LTCG accordingly - HELD THAT:- The Appellant assessee has filed copy of JDA including English translation. As per clause k of the said JDA , the owner has agreed to transfer the impugned property by sale deed in the name of proposed Co-Operative society and/ or in the name of individual prospective buyers. As per the said JDA the owner has only granted right to Developer to enter the impugned property for the purpose of development. As per JDA, the developer has given Rs.1 crore as deposit. No other consideration paid. It transpires from the JDA that there is no actual transfer of land and assessee has not received any consideration also. It is also observed from the copies of the returns of Income filed by the assessee in the paper book, that the assessee has shown Long Term Capital Gain from sale of the impugned land in subsequent years as and when the assessee has received consideration. Assessee has also paid Tax on the said Long term capital gain. Therefore, in the facts and circumstances of this case it is held that there is no capital gain chargeable in AY 2012-13 on the impugned Joint Development agreement. Thus ground number 1 is allowed. Whether the appellant has converted the land into stock-in-trade as claimed? - It is an admitted fact that assessee could not demonstrate conversion of land into stock-in-trade by showing entries in the books of accounts. As per accounting, whenever land is converted into stock-in-trade, it shall appear as closing stock at the end of the year in which it was converted into stock-in-trade. In the case of the assessee it should have appeared as closing stock for the A.Y. 2012-13 and 2013-14. However, we have verified from the profit and loss account filed by the assessee in the paper book that it does not appear as closing stock for the A.Y. 2013-14. The assessee has not filed profit and loss account for the A.Y.2012-13. It is also an admitted fact that no Audit Report has been filed means no Audit has been carried out. It is observed that for A.Y. 2014-15, the assessee has shown sales of Rs.1,96,32,700/-, but, though the sale is more than One Crore, no Audit Report is filed by the assessee. No Balance Sheet has been filed by the assessee for the A.Y. 2012-13. Thus, the assessee has not filed any evidence to substantiate his claim that the impugned land was converted as stock-in-trade before entering into Joint Venture Agreement. Therefore, assessee’s claim that land was converted as stock-in-trade before entering into Joint Venture Agreement is hereby rejected. Therefore, section 45(2) is not applicable in the case of the assessee. Therefore, this ground raised by the assessee is dismissed. Double taxation if LTCG is taxed in the AY 2012-13 - assessee also claimed that assessee has disclosed capital gains arising in respect of the impugned land given for development under Joint Venture Agreement for A.Y. 2013-14 to 2017-18 and substantiate the claim, assessee filed copies of the Returns of Income for those years - HELD THAT:- We have perused the returns of Income filed by the assessee. It is a fact that the assessee has shown LTCG in subsequent years. However, we have already held that LTCG does not arise in AY 2012-13, hence this ground is academic in nature, hence dismissed Issues Involved:1. Whether capital gain arose in A.Y. 2012-13 with reference to the Joint-Venture Agreement dated 28.09.2011.2. Whether the land was converted into stock-in-trade and accordingly, capital gain is to be calculated as per section 45(2) of the Income Tax Act.3. The issue of double taxation of capital gains.Issue-Wise Detailed Analysis:1. Capital Gain in A.Y. 2012-13:The appellant-assessee, along with other co-owners, entered into a Joint Venture Agreement (JDA) dated 28.09.2011 with Venkatesh Developers. The JDA was duly registered, and the assessee offered Long Term Capital Gain (LTCG) in the return of income for A.Y. 2012-13 based on the stamp duty valuation of Rs. 4,21,38,000/-. The assessee's share was calculated as 1/3rd of this amount. However, the assessee later contended that no actual possession was given to the developer, and thus, no capital gain should be taxable in A.Y. 2012-13. The Tribunal observed that the JDA allowed the developer to enter the property only for development purposes and no other consideration was paid. The Tribunal concluded that there was no actual transfer of land, and the assessee had not received any consideration. The assessee had shown LTCG in subsequent years when consideration was received. Therefore, it was held that no capital gain was chargeable in A.Y. 2012-13 based on the JDA.2. Conversion of Land into Stock-in-Trade:The assessee claimed that the land was converted into stock-in-trade before entering the JDA, which should be considered under section 45(2) of the Income Tax Act. However, this issue was not raised before the Assessing Officer (AO), and the AO had no opportunity to verify this claim. The Tribunal specifically queried the assessee's Authorized Representative (AR) to demonstrate the conversion of land into stock-in-trade by showing relevant entries in the books of accounts. The AR admitted that no books of accounts were maintained, and no closing stock was shown in the profit and loss account for A.Y. 2012-13 and 2013-14. The Tribunal observed that the assessee did not file any evidence to substantiate the claim of conversion into stock-in-trade. Consequently, the Tribunal rejected the claim that the land was converted into stock-in-trade before entering the JDA, and section 45(2) was deemed inapplicable.3. Double Taxation:The assessee contended that taxing LTCG in A.Y. 2012-13 would result in double taxation, as the capital gains arising from the land given for development under the JDA were declared in A.Y. 2013-14 to 2017-18. The Tribunal examined the returns of income for these years and confirmed that the assessee had shown LTCG in subsequent years. However, since it was already held that LTCG does not arise in A.Y. 2012-13, this ground was considered academic in nature and dismissed.Conclusion:The appeal of the assessee was partly allowed. It was concluded that no capital gain was chargeable in A.Y. 2012-13 based on the JDA, and the claim of conversion of land into stock-in-trade was rejected due to lack of evidence. The issue of double taxation was dismissed as academic. The order was pronounced on 29th April, 2022.