TaxTMI 
TaxTMI 
2022 (12) TMI 1126
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....(A) has failed to appreciate the fact that the road portion was already converted into stock in trade and was used for the purpose of business. Since the nature of road area changed from assessee's own land into common public road, there is an extinguishment of assessee's right over the land as per section 2(47) of the I.T.Act giving rise to capital gain. 4. The learned CIT(A) has not taken into consideration that section 43CA is not overridden by section 47 and hence the transfer under the nomenclature " under an irrecoverable trust" does not hold back the adoption of the stamp duty value of the transferred non capital asset as full consideration of the assessee. 5. Alternatively, CIT(A) at-least ought to have reduced the road component from the stock-in-trade as it was never intended for sale but only intended to be gifted through an "irrevocable gift deed". 6. For these and such other grounds that may be adduced at the time of hearing, it is prayed that the order of the CIT(A) is cancelled and the order of the Assessing Officer restored. 3. The brief facts of the case are that the assessee is engaged in the business of real estate, bus trans....
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....he Ld.CIT(A) after considering relevant submissions of the assessee and also taken note of certain judicial precedents, including the decision of the Hon'ble Madras High Court in the case of Mr.M.Krishnasamy v. The Member Secretary of Chennai Metropolitan Development Authority in WP No.14670/2010, held that when the assessee has earmarked the land for common utilities without any exclusive right to anybody, including the assessee as per prevailing laws and guidelines related to layout approval, the AO cannot tax said land earmarked for common amenities purpose within the meaning of Sec.47(iii) of the Act, and also Sec.45(2) of the Act. Therefore, deleted the additions made by the AO towards computation of long term capital gains on deemed transfer of land earmarked for roads and other common facilities and also application of Sec.45(2) of the Act, to compute income from business and profession. The relevant findings of the Ld.CIT(A) are as under: 5.5.1 I have examined the facts of the case and submissions filed regarding the additions made. It is not in dispute that when a land is converted into stock-in-trade, section 45(2) of the IT Act is applicable and accordingly asse....
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....if the provisions relating to head Capital Gains are not to be made applicable after conversion of the capital asset into stock-in-trade, section 45(2) itself will become inapplicable. One cannot choose to invoke one section for taxation i.e., 45(2) and exclude another section grating exemption i.e., 47(iii), when both sections are falling under the same chapter / head arbitrarily. As mentioned by appellant, the Circular No.791 dated 02.06.2000 of CBDT, has clarified the position that for the purposes of giving benefit of Sections 54EA, 54EB and 54EC (sections giving exemptions to Capital Gains otherwise chargeable under Sec. 45), the date in which the stock (which was converted from Capital Asset) is sold or transferred is to be taken into account and not the date of conversion. Thus, the position that emerges is that the liability to capital gains under Sec. 45(2) arising in one year, can later become exempted subsequently after its conversion into stock in trade (may be even in the succeeding years) by reason of operation of Sec. 54EA, 54EB and 54EC, etc. Hence, the position can be no different if such gains get exempted under Sec.47(iii), as against Sec.54EA, 54EB and 54EC etc.....
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.....100/- . In any case, it is the value that can be assessed by the Registrar, as and when the document is presented for registration. As pointed by the AR in submissions, the Stamp Duty Authorities, have in a similar case, have accepted the Settlement Deed for the road portion, valued at Rs.100/- for the purposes of payment of Stamp Duty. Since Sec.43CA uses the words 'assessed' or 'assessable' even if 43CA is to be invoked, the value assessable would only be Rs.100/- and nothing more. In the above facts and circumstances, the addition of Rs.1,81,74,065/- to the business income as value of road portion is deleted. 5. The Ld.DR, submitted that the Ld.CIT(A) erred in not appreciating the fact that provisions of Sec.47(iii) of the Act, is applicable only to capital asset and not to stock-in-trade as the assessee has already converted capital asset into stock-in-trade. The Ld.DR further referring to provisions of Sec.2(47) of the Act, submitted that when the assessee has converted own land into common utility purpose, there is an extinguishment of right in the land as per provisions of Sec.2(47) of the Act, which give rise to capital gains. The Ld.CIT(A) without appre....
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....n transferred. Since, the assessee has transferred land for the impugned assessment year, he has computed book profit by applying provisions of Sec.45(2) of the Act r.w.s.43CA of the Act. 8. We have given our thoughtful consideration to the reasons given by the AO in light of arguments advanced by the Ld.Counsel for the assessee and we ourselves do not subscribe to the reasons given by the AO for the simple reason that the land earmarked for public utility purpose in terms of municipal regulations while forming residential lay out, cannot be brought to tax either u/s.47(iii) of the Act or u/s.45(2) of the Act, because, relinquishment of right in land earmarked for common utility purpose, cannot be considered as extinguishment of any right in property which can be considered as transfer within the definition of Sec.47(iii) of the Act. Further, the provisions of Sec.45(2) of the Act, also cannot be invoked to compute business profits when the land has been converted into stock-in-trade, because, the assessee has not transferred the land for a consideration. Therefore, we are of the considered view that when the assessee has relinquished her right in the land earmarked for common u....