TaxTMI 
TaxTMI 
2016 (4) TMI 35
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....s erred in not considering claim of benefit of section 54F of the I.T. Act, 1961. (iii) On the facts and in the circumstances of the case , the ld. CIT(A) has erred in confirming the addition of Rs. 19 lacs made by AO under the head unexplained cash deposit in Bank account." 2. Regarding ground No.1, the relevant facts as apparent from records are that during the financial year relevant to A.Y. 2009-10, assessee had sold agricultural land situated at Sanganer for a total consideration of Rs. 38,00,000/-. Since the land was within 8 Kms of the municipal limits at the time of sale, the same was held as a capital asset in terms of the provisions of section 2(14)(iii) of the Act, liable for capital gains tax. On the basis of registered sale document dated 01.07.1981, made available by the DIG (Stamps), since the land was initially purchased prior to 1.4.1981, the AO determined the cost of acquisition of the said land as on 01.04.1981 @ Rs. 97.63 per bigha and the indexed cost of acquisition of Rs. 1,031/-and the long term capital gains was accordingly computed at Rs. 37,98,969/-. 2.1 The ld. AR argued the matter at length and submitted that the AO has adopted the cost of....
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....he head "capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Further, it provides that where long term capital gains arises from the transfer of a long term asset (as in the instant case), cost of acquisition shall be substituted for indexed cost of acquisition which has been defined under Explanation (iii) to section 49 as under: "Indexed cost of acquisition means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on the 1ST Day of April, 1981, whichever is later." Further, Section 55(2) defines the expression "cost of acquisition" specifically for the purpose of sections 48 and 49 in the following terms: "(2) For the purposes of sections 48 & 49, 'cost of acquisition', in relation to any....
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....s a capital asset was acquired by the assessee when it was converted into a capital asset and how it would be possible in such a case to determine the cost of acquisition. There are no two different acquisitions of property, one as a non-capital asset and the other as a capital asset. The property is acquired by the assessee only once and merely its character changes in the sense that, whereas, originally it was non-capital asset, it now becomes capital asset. It would indeed be doing violence to the language of section 48, clause (ii), to read the words the "cost of acquisition of the capital asset" in the manner suggested on behalf of the assessee. We would have to introduce an unwarranted fiction, namely that when the property, which at the date of acquisition was noncapital asset, becomes a capital asset, it is deemed to be acquired by the assessee as capital asset on that date and, furthermore, though there can be no cost of such acquisition, the market value of the property on that date should be deemed to be the cost of such acquisition. There is no warrant for imposing such legal fiction on the plain language at section 48, clause (ii).... The contention of the ass....
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....e Hon'ble Supreme Court held (headnote): "that the assessee's assessable profit on the sale of these shares was the difference between the sale price of the shares and the market price of the shares prevailing on the date when the shares were converted into stock-in trade of the business in shares, and not the difference between the sale price and the price at which the sharers were originally purchased by the assessee." Also, ld AR had drawn from another decision of the Hon'ble Supreme Court in case of Groz-Beckert Saboo Ltd. 116 ITR 125, wherein the Supreme Court held that: "it is now well settled that where an assessee converts his capital assets into stock in trade and starts dealing in them, the taxable profit on the sale must be determined by deducting from the sale proceeds the market value at the date of their conversion into stock- in- trade (since this would be the cost to the business) and not the original cost to the assessee." According to the facts arising in the above said two decisions of the Hon'ble Supreme court, the capital assets were converted into stock in trade and for the purpose of computation of business income, the Supreme Court he....
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....upport of cost of residential house is placed at p. 9-14 of PB. In view of the above facts without properly appreciating the facts of the case, the AO has made the addition and confirming by CIT(A) on ex-parte basis. 4.2 Considering the totality of the facts and circumstances of the case, where the assessee has demonstrated the withdrawal of Rs. 15,40,000/- towards construction of residential house from his bank account and cost of construction being supported by the valuer's report, the AO is directed to give necessary relief by way of deduction under section 54F of the Act. Hence, the ground of appeal of assessee is allowed. 5. Regarding ground no. 3 where the appellant has challenged the action of the ld. CIT(A) in confirming the addition of Rs. 19 lacs made by AO under the head unexplained cash deposit in Bank account, the AO noticed that cash of Rs. 9,50,000/- was deposited on 03.10.2008 and another cash of Rs. 9,50,000/- was deposited on 10.10.2008 in the bank account of the assessee. Since the assessee could not explain the source of these cash deposits, the same were treated as undisclosed income of the assessee. As per Ld CIT(A), in the absence of any explanation ....