TaxTMI 
TaxTMI 
2020 (7) TMI 134
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....nd thereby deleting the long term capital gain of RS.6,78,41,691/-? (ii) Whether in the facts and circumstances of the case, the tribunal was correct in law in holding that the cost of the properties received in partial partition of HUF to be adopted as claimed by the assessee under Section 37 (1) of the Income Tax Act as deduction while computing the income under the head 'Profit and Gains of Business or Profession', ignoring the fact that the assessee did not incur any cost on such properties other than the cost incurred by the HUF at Rs. 9,09,050/-? 2. Facts giving rise to filing of the appeal in nutshell are that assessee is an individual engaged in the real estate business. The assessee filed return of income on 20.11.2006 declaring total income of Rs. 1,37,71,300/-. The case was selected for scrutiny and a notice under Section 143(2) of the Act was issued. The assessee in the profit and loss account had shown purchase and sale of sites and net profit of Rs. 1,13,18,182/- was shown and was declared as income from business. Thereupon a query was made as to how the cost of the site was worked out and the assessee was asked to submit relevant documents. The assessee v....
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....preferred by the assessee was allowed. Being aggrieved, the revenue is in appeal before us. 4. Learned counsel for the revenue submitted that the tribunal ought to have appreciated that lands belong to joint family which were subjected to partition and were allotted to the assessee and sold by him and that such a sale gives rise to capital gains and therefore, provisions of Section 45(2) of the Act are attracted. It is further submitted that the HUF neither filed any return nor any books of accounts and also did not have any Permanent Account Number and therefore, existence of HUF itself was doubtful and the assessee was unable to prove the existence of HUF before the authorities. It is also submitted that the cost of acquisition of lands was low and cost or fair market values of the properties as on the date of family arrangement was highly inflated. The entire arrangement made by the assessee was designed to evade the tax liability. It is also urged that the findings recorded by the tribunal are perverse as the findings recorded by the assessing officer as well as the Commissioner of Income Tax (Appeals) have been reversed without there being any material on record. It is a....
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....her or not connected with his business or profession; (b) xxxx but does not include- any stock-in-trade [other than the securities referred to in sub-clause (b)]], consumable stores or raw materials held for the purposes of his business or profession ; xxxxxxx 2(47) "transfer", means in relation to a capital asset, includes,- .................... 45(2) Notwithstanding anything contained in sub- section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as, stock- in- trade of a business carried on by him 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 and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset." 49(1) Where the capital asset became the property of the assessee- (i) On any distribution of assets on the total or partial partition of ....
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....of real estate business and continued to be in nature of stock in trade in the hands of the assessee. There is no iota of material on record to show that the assets obtained by the assessee were capital assets. The character of assets received on partition did not change and there is no provision in the Act to indicate that assets received on partition are capital assets, as no deeming provisions have been enacted by the Legislature. Section 45(2) of the Act are not applicable in the fact situation of the case as the asset received is stock in trade. Alternatively, it is worth noticing that there is nothing on record to indicate that any capital asset has been converted to stock in trade and provisions of Section 49(1) are not applicable to stock in trade. The definition of 'capital asset' in Section 2(14) expressly excludes stock in trade. 12. The substantial questions of law framed by this court are in fact questions of fact and the findings on the questions involved in this appeal have been arrived at by the tribunal on the basis of meticulous appreciation of material on record. The relevant extract of the order passed by the tribunal reads as under: 7.10 From the fa....