TaxTMI 
TaxTMI 
2015 (3) TMI 8
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....or the explanation of the factory in the land purchased by the assessee. Accordingly, the proposal for expansion of the factory was dropped and the same was converted into residential flats with an intention to develop villa projects. Since the object of the company does not permit the assessee to do business in real estate by converting the land into residential plots, a resolution was passed on 19-09-2006 to convert the land into residential plots. Accordingly, the said land was converted into residential plots by dividing into plots and part of the plots to the extent of Rs. 1,18,23,750 was sold during the financial year relevant to assessment year 2007-08. According to the ld.representative, the assessee claimed gain on sale of the land as exempt from capital gain since it was an agricultural land situated in the village panchayat. However, the assessing officer brought 50% of the gain on sale of the land as capital gain. The remaining 50% was assessed as business income. 3. According to the ld.representative, on the date of conversion of land into stock in trade by dividing the same into residential plots, the land in question was an agricultural land in fact used for agric....
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....ng site for the purpose of promoting villa project. In fact, part of the land was sold in the assessment year 2007-08. According to the ld.DR, even though the land was situated in the village panchayat, the assessee purchased the land and removed the existing rubber plantation for the purpose of expansion of factory, thereafter the same was converted into housing site. The land was divided into housing sites and the same was sold. After purchase of the land, the land was converted into stock in trade in the books of account and the same was sold to several people. Therefore, according to the ld.DR, u/s 45(2), conversion of capital asset into stock in trade is chargeable to capital gain in the year in which the same was converted. On sale of the land, the assessee is liable to pay tax on the income as business income. Therefore, according to the ld.DR, the CIT(A) rightly confirmed the orders of the assessing officer for the assessment years 2007-08, 2008-09 and 2009-10. 5. We have considered the rival submissions on either side and also perused the material available on record. The assessee claims that it purchased 512 cents of agricultural land for the purpose of expansion of it....
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....nbsp; This is to certify that the property lying in Block 45, Resurvey Nos.324/1, 324/2, 324/3 & 324/4 of Aikkaranadu North Village, Kadayiruppu Kara held for and on behalf of Synthite Industrial Chemicals Ltd by its Managing Director Mr. C.V. Jacob, S/o Varkey, Nechupadom, Kadayiruppu as per village records 56/6 is agricultural land (Nilam) and that it is being used for agricultural operations. This certificate is issued for producing it before the Income Tax Office, Ernakulam. Sd/- with date 20/10/10 Kadayiruppu  ....
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.... available on record to suggest that it was agricultural land. The resurvey Nos. 299/4, 324/5, 324/6 and 299/2 are omitted in the certificate said to be issued by the village officer. Furthermore, the admitted case of the assessee is that part of the land to the extent of 188 cents of and was sold to various persons on 27-03-2007. If that is so, it is not known which survey number of the land that was said to be sold. If any part of the land is sold in resurvey Nos. 324/1, 324/2, 324/3 & 324/4 then the assessee cannot own the entire land as on 20-10-2010 when the village officer issued the certificate. If that is so, it is not known under what capacity the village officer issued the certificate saying that the land belongs to the assessee company and it was agricultural land used for agricultural purpose. The land admittedly was converted into stock in trade by dividing the same into residential plots and the basis of the resolution dated 19-09-2006, i.e. within a period of six months from the date of the purchase. Therefore, the usage and purpose of the land was converted and changed into non agricultural purpose. Moreover, there was a confusion as to which part of the land was so....
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....sfer of the capital asset." In view of the above, when the capital asset was converted into stock in trade by the owner, the profits or gains arising from such transfer shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him. 8. The question arises for consideration is - which is the year in which the capital gain has to be charged? Whether, the year in which the conversion was made or the year in which the land was sold after the same was converted into stock-in-trade? The claim of the assessee is that in view of the language employed by the legislature, the capital gain, if any, has to be charged only in the year in which the land was sold. However, the department claims that the same has to be charged in the year in which the land was converted into stock-in-trade. We find that the Kerala High Court had an occasion to consider a similar issue in CIT vs National Tyres & Rubber Co Ltd (2011) 202 Taxman 625 (Ker). After considering section 45(2), the Kerala High Court found that the land was converted into stock in trade which result huge profit to the assessee u/s 45(2) and the land was sold in th....
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....or 1993-94 and 1994-95 are not seen reopened probably on account of limitation. When objection was raised by the audit party, the AO reopened the assessment for the ast.yr.1995-96, the previous year of which main portion of the land with building thereon was sold by the assessee, and brought to tax the capital gain attributable to such land assessable under s.45(2) of the Act." In view of the above, the capital gain, if any, has to be charged only in the year in which the assessee has sold the land after conversion of the same into stock in trade. In the case on hand, the assessee claims that only 188 cents of and was sold in the assessment year 2007-08. No material is available on record in respect of the year in which the remaining land was sold. Therefore, the assessing officer has to ascertain when the remaining portion of the land was actually sold after the same was converted into stock in trade. The capital gain shall be charged in the year in which the land was sold after conversion into stock in trade. Accordingly, the orders of the lower authorities to that extent is set aside and the issue of charging capital gain is remitted back to the file of the assessing officer. Th....
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.... accounts. When the assessee has sufficient own funds than what was invested for earning exempted income, according to the ld.representative, there cannot be any disallowance. The assessee has also filed copies of the balance-sheet to claim that sufficient own funds are available. The ld.representative further submitted that bank charges cannot be subject matter of disallowance u/s 14A r.w.r. 8D of the IT Rules, 1962. According to the ld.representative, Rule 8D was introduced with effect from assessment year 2008-09, therefore, it cannot be made applicable for assessment year 2007-08. 12. We have considered the rival submissions on either side and also perused the material available on record. The assessing officer disallowed part of the interest and bank charges on the borrowed funds. The contention of the assessing officer is that the assessee used borrowed funds for earning exempted income, therefore, the interest paid / payable on the borrowed fund is not allowable. The assessee claims that sufficient own funds are available. This Tribunal is of the considered opinion that if the assessee has sufficient liquid funds of its own then to that extent the assessee might have used....