TaxTMI 
TaxTMI 
2013 (1) TMI 427
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....1991-92 31,71,654 1,44,258 33,15,912 1992-93 20,76,664 92,095 21,68,759 1993-94 2,08,350 10,563 2,18,930 1994-95 12,000 1,286 13,286 1995-96 60,000 18,350 78,350 2001-02 3,65,000 19,938 3,84,936 2002-03 1,50,000 20,370 1,70,370 2003-04 20,000 - 20,000 Total Rs.1,28,10,657 2.1 The assessee had also incurred expenses aggregating to Rs.150.63 lacs as per details given below : F.Y. Nature of expense Amount (Rs. in lacs) 1994-95 Land leveling expense 5.80 1994-95 Boring 0.65 1994-95 Fencing 7.41 1994-95 Consulting charges, advertisement & marketing legal fees, traveling and hotel expenses 36.27 1995-96 Stamp duty and registration 0.95 1996-97 Land revenue 0.09 1996-97 Legal expense 0.05 1996-97 Interest capitalized 99.41 Total Rs.150.63 2.2 The assessee claimed that the land had been converted into stock in trade on 31.3.2000. The assessee, therefore, computed the capital gain being difference of market value as on 31.3.2000 and cost of acquisition as long term capital....
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....d land into stock-in-trade when there was covenant in respect of user of land. 2.5 The assessee explained that the assessee had never bought any agricultural land as land acquired was always meant for industrial use. The final use of the land even after conversion to non-agricultural was actually for industrial purposes. The assessee had converted the land into stock-in-trade with a view to commercially exploit the land and such conversion could not be considered as void. The conversion into stock-in-trade had been accepted by the AO in the current assessment under section 143(3) for assessment year 2000-01 and thereafter all along the land had been shown as stock-in-trade and accepted in assessments upto assessment year 2006-07. It was, therefore, not proper for the AO to question the conversion already accepted in assessment year 2000-01. The assessee further submitted though the authorities permitted the use for industrial purpose, it did not mean that the assessee could not carry on industrial activities. The assessee converted land into stock-in-trade to carry out real estate development for providing the property for buyers for industrial purposes. It was pointed out that ....
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....th the observation that remedial measures would be taken on receipt of report of DVO. As regards the cost of acquisition, the AO observed that cost shown by the assessee of Rs.2,72,92,000/- also included interest capitalized of Rs.99,41,000/-. He, therefore excluded interest cost and computed cost of acquisition at Rs.1,73,57,000/- and short term capital gain was computed at Rs.27,62,93,000/-. 3. The assessee disputed the decision of AO and submitted before CIT(A) that the assessee was engaged in the business of manufacturing of specialized chemicals and in development of real estate. It also submitted that the real estate business had been started by it since 1994 in which year the assessee had contributed land at Malad as its share of capital in partnership firm known as "Bombay Properties", a property which was subsequently developed and sold in 1997. The assessee converted other lands situated at Gorgeaon into stock-in-trade and had entered into a joint venture with Mahindra Realities & Infrastructure Developers and profit derived there from had been declared as business income. Thereafter on 31.3.2000 the assessee converted land under consideration into stock-in-trade with ....
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....submissions of the assessee observed that the area in which land was situated had already been declared by the State Government as industrial zone and the transfer of the land itself was made under Bombay Tenancy & Agricultural Lands Act, 1958 under section 63 as per which agricultural land could be transferred for non-agricultural purpose. Therefore, right from the date of acquisition of the land by the assessee, it was considered as non-agricultural land by the revenue authorities, otherwise it could not have been transferred for industrial use. The land had been purchased for industrial use. Merely because the land was shown as agricultural land in revenue records, the same could not be considered as agricultural land in absence of any user of the land for agricultural purposes. For land to be classified as agricultural, it should be meant for agricultural use and should be actually used or ordinarily used for agricultural purposes. The land in this case could not be used for agricultural purpose being in industrial zone. The MOA of the assessee also did not permit agricultural activities. Moreover, the issue of conversion of land into stock-in-trade had already been decided and....
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.... could not be interpreted with respect to provisions of other statute. In that case, it was pointed out that exemption had been denied under Income tax Act. The Court allowed exemption under the Wealth tax Act based on the provisions of the said Act. As regards conversion in assessment year 2000-01, it was submitted that the issue had not been examined by the AO in that assessment year as it had no impact on computation of income. Therefore, there was no lack of jurisdiction on part of the AO in assessment year 2007-08 in which income was being computed from sale of land to look into issue of conversion as the AO had to examine all aspects relating to computation of capital gain. It was also submitted that the term "agricultural land" must be interpreted with respect to literal meaning as the same was clear and unambiguous. He referred to the judgment of the Hon'ble Supreme Court in the case of Orissa State Warehousing Corporation Vs CIT (237 ITR 589) in this regard and several other judgments. It was thus argued that land in this case became capital asset only on 27.5.2004 when it was converted into non-agricultural and it was accordingly urged that approach adopted by the AO in r....
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....er section 45(2) of the Act and only the difference between market value as on 31.3.2000 and sale value could be assessed as business profit in view of the judgment of the Hon'ble Supreme Court in the case of CIT vs. Bai Shirinbai K. Kooka (46 ITR 86). It was also pointed out that factum of conversion was not in dispute and only applicability of provisions of section 45(2) was disputed. It was argued that the land being non-agricultural which had been converted into trading stock on 31.3.2000, provisions of section 45(2) have to be applied and profit had to be computed under the said provisions in the year of sale. In relation to application of provisions of section 50C, it was submitted that the same were not applicable to computation of business profit and since the provisions were effective from assessment year 2003-04, the same did not apply to computation of capital gain for assessment year 2000-01. It was accordingly urged that the order of CIT(A) should be upheld. 5. We have perused the records and considered the rival contentions carefully. The dispute raised in this appeal is regarding computation of capital gain from sale of land. The assessee had acquired certain plot....
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....e by the assessee. The AO has not accepted the claim of the assessee that factum of conversion had been accepted in assessment year 2000-01 in the order passed under section 143(3)/147. The AO has observed that in that year, the issue was neither relevant to the computation of income nor had been specifically examined by the AO. The AO has thus rejected the claim of conversion as on 31.3.2000 as null and void. As per the AO, capital asset came into existence on 27.5.2004 when the land was converted into non-agricultural land and since the same was sold within a period of three years on 25.5.2006. The AO has computed short term capital gain from sale of land. 5.2 Thus the main dispute is whether on 31.3.2000 when the land had not been converted into non-agricultural land, it can be considered as a non-agricultural land and whether the conversion by the assessee into stock-in-trade was legally valid. We find that even though the land had not been converted into non-agricultural land on 31.3.2000, there is no dispute that the land was situated in the industrial zone and was meant for industrial use. The claim of the assessee that the land was not meant for agricultural use nor any ....