TaxTMI 
TaxTMI 
2012 (5) TMI 145
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....ainst the sale of land (Capital Asset). 3. Whether on the facts and the circumstances of the case the tribunal was correct in not applying the provision of sec. 50C of the I.T. Act, 1961 where the sale-purchase, transfer of ownership & property even of the stock is affected through a registered sale deed bringing the transition under the purview of sec. 50C unlike other transactions of sale-purchase of stocks which are generally not a subject matter of registration before the competent authority under the Registration Act." The background facts may be noticed in brief. The respondent i.e. the assessee, a private limited company is engaged in the business of real estate and construction. It has filed its return of the income declaring the total income at Rs.38,79,703/-. In the assessment proceedings under section 143 (2) of the Act, the Assessee had shown the following sales at different sites:- 1. Sale of offices at KAN Chambers Rs.3,25,07,000/- 2. Sale of flats at woodland apartments Rs.1,04,25,000/- 3. Sale of shops at Mega Mall Rs.1,57,50,000/- 4. Sale of offices at Mega Mall Rs. 80,00,000/- 5. Sale of plots Rs. 79,84,200/- Total Rs.7,46,....
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....lding that the Section 50C of the Act is not applicable. He submits that the assessee company is although engaged in the business of real estate and construction but from the returned figures of income it is but obvious that it is deriving income mainly from the sale of constructions in the shape of shops, offices, apartments and chambers. Attention of the Court was invited towards the disclosed sales of these items as found mentioned in the assessment order. Out of total sale of Rs.7,46,66,200/-, the sale of plots is only a small fraction of it i.e. at Rs.79,84,200/-. Reliance was placed by him on certain decisions relating to sale of land and capital gains which will be referred at the appropriate place. In reply, Shri S.D. Singh, learned counsel for the assessee company submitted that the two authorities below have examined the matter and have rightly reached to the conclusion that the sale of plots was business activity of the assessee company; the plots were in the shape of stock in trade and they were not capital assets. This being so, the profit and gains from the sales of plots is liable to be taxed as profit and gains from business and not as capital gains. In othe....
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....nd resold, and (2) in what quantity was it purchased and resold. If the commodity purchased is generally subject matter of trade, and if it is purchased in a very large quantity, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. After making certain observations, the judgment proceeds to consider the foreign precedents. It considered somewhat similar case Cayzer, Irvine and Co. Ltd. Vs. Commissioners of Inland Revenue, (1942) 24 Tax Cases, 491 where land purchased and subsequently developed, with the object of making it more readily saleable, was sold at a profit, the intention of the assessee was treated to be not to hold the land as an investment, but as a trading asset. It has been laid down therein that the intention was to hold the land not as an investment but as a trading asset and in order to develop it and to market it. It was also held that the transaction was an adventure in the nature of trade, though the property purchased and sold was land. In Mohammed Meerakhan (P.M.) Vs. Commissioner of Income-tax, (1969) 73 ITR 735, it has been held that it is not possible to evolve any single legal test or formula which can....
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....not employ any workers to restart it. All these factors weigh heavily to hold that the transaction of purchase and sale was towards full and final settlement of loan amount in the nature of capital transaction. Section 2 (14) of the Income-tax Act defines the capital asset which reads as follows:- "S.2(14) - ''capital asset' means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-- (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him. Explanation. - For the purposes of this sub-clause, ''jewellery' includes-- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones....
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.... is no dispute. The dispute is with regard to the sale of plots. Investment in purchase and sale of plots by a builder who is indulged in selling buildings is ancillary and incidental to his business activity. It is a matter of record that the assessee has treated the land as stock in trade which finds corroboration from its balance sheet. Stock in trade has been excluded from the definition of capital asset. According to the Webster's New International Dictionary, the 'stock-in-trade' is "a. The goods kept for sale by a shopkeeper. b. The fittings and appliances of a workman." In other words, the stock-in-trade includes all such chattels as are required for the purposes of being sold or let to hire on a person's trade. According to Stroud's judicial dictionary, 4th Edition, Volume 5 page 2623 "stock-in-trade comprises all such chattels as are required for the purposes of being sold, or let to hire on a person's trade. In Additional Commissioner of Income-tax Vs. Puttu Coal Pvt. Ltd., (1983) 140 ITR 740 (Bombay), the assessee was money lender, who purchased a ship in satisfaction of his major portion of outstanding loan. The ship was considered as stock in trade of the assessee's m....