TaxTMI 
TaxTMI 
2023 (2) TMI 839
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....The C.I.T (A) ought to have seen that in the transaction of exchange only the net consideration to be taken which in this case is the guide line value of both the properties. He cannot take only one part of the transaction and leave the other and arrive at an erroneous Capital Gain. 4. The C.I.T.(A) ought to have followed the decisions cited by the Appellant wherein only the net consideration is taken into account. 5. The Assessment is excessive and opposed to law and facts of the case. 6. Your Appellant craves leave to file additional grounds of appeal before or at the time of hearing." 3. The brief facts of the case are that, the assessee is engaged in the business of purchase and sale of land, filed his return of income for the assessment year 2014-15 on 21.09.2014, declaring total income of Rs. 1,50,03,250/-. During the financial year relevant to assessment year 2014- 15, the appellant had claimed capital loss and set off against long term capital gain. The AO, called upon the assessee to file necessary details and justify set off of capital loss against capital gain. In response, the assessee submitted that, on 14.08.2013 he had transferred land admeasuring 35 cents....
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....gains of Rs. 3,26,75,007/-. The relevant findings of the AO are as under: 3.4 During the course of scrutiny, the assessee was asked to show cause why the capital gain may not be recomputed taking the stamp duty value of the Land transferred as the sale consideration and actual cost of acquisition thereof instead of adopting the market value of the properties received by the assessee in exchange. In response to this, e assessee submitted as under: With regard to your query regarding adoption of stamp value for arriving at the exchange loss instead of market value as mentioned in the document, that in an exchange normally there is no cash involved and only the difference in the vale as per guideline value is taken for consideration for arriving at the stamp duty etc. Hence, the value adopted in the document itself is only the stamp value as determined by the State Government for registration purposes." Further, the assessee has furnished a note on the same issue which reads as under: "The assessee has exchanged a part of the plots and vacant land with another party and in that process acquired lands in the same area which is part of the business asset. This has been necess....
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....ase, the assessee has transferred two landed properties: i. Land in Survey No.913/2, Thaivur Village, ThiruporurTaluk on 14/08/2013 for which the consideration received was another piece of land with guideiine value of Rs.72,48,500/-. (Hereinafter referred to as Property A) Land in Survey Nos.912/1936/1 and 936/2 situated at No.46, Thaiyur Village, ThiruporurTaluk on 04/09/2013 for which the consideration received was another piece of land with guideline value of Rs. Rs. 1,15, 10,400/-. (Hereinafter referred to as Property B) 3.6 Since the above two transactions fall within the ambit of "transfer", Section 45 of the Income Tax Act, 1961 shall be applicable and the gains arising thereon shall be chargeable under the head "Capital Gains" in the year of transfer. Once it is established that Section 45 shall be applicable, the next question is how to compute the gain or loss arising from such a transfer. The computation of capital gain or loss is governed by Section 48 wherein it is prescribed that the income chargeable under the 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 cap....
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....asset alone. In case of land sale, the fair value as determined by the registration authorities has to be considered. In this case the net sale consideration 0n the exchange is considered which is supported by court decision also." The assessee has relied on the following decisions in this regard: a. Decision of the High Court of Bombay in CIT vs Tata Iron and Steel Co. Ltd (1994) 206 ITR 196 (Bombay) b. Decision of the Apex Court in CIT vs G. Narasimhan (Decd.) and Others (1999) 236 ITR 327 (SC) c. Decision of the High Court of Calcutta in Central Industries Ltd vs Commissioner of Income Tax, West Bengal (1975) 99 ITR 211 (Cal) 3.9 While the first two decisions in (a) and (b), are related to what would fall under the purview of "transfer" defined by Section 2(47), the third deals with the capital loss arising on transfer of shares. There is no dispute on whether the exchange undertaken by the assessee falls under the purview of transfer which is also in accordance with the first two decisions relied on by the assessee. The third is the decision of the Hon'ble Calcutta High Court in the case of Central Industries Ltd vs CIT wherein it was held that when the assessee....
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....ow: The assessee is a company dealing in shares. It was holding 14500 shares of Asiatic Oxygen & Acetylene Company Limited (hereinafter referred to as `the first Company'), of the face value of Rs. 10/- each as its stock-in-trade. The said shares were valued by the assessee at Rs. 1,45,000/- (the cost price) at the end of the assessment year 1962-63 and were included in the closing stock. In the assessment year under reference a new company, Asiatic Oxygen Ltd. (hereinafter referred to as `the second Company') had made an offer to obtain shares of the first Company in exchange for the allotment of its own shares at the rate of 38 equity shares in the second company for 10 equity shares in the first company. The assessee accepted the said offer and received 55,100 shares of the second company in exchange of the aforesaid holding of 14,500 shares in the first company. The face value of the shares of the second Company was Rs. 10/- per share. The assessee, however, valued the shares of the second Company also at Rs. 1,45,000/- being the cost price of the shares of the first Company. The Income Tax Officer did not accept the contention of the assessee that it had not earned ....
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....rice of the property of the appellant with that of the market price of the property of the other party which got exchanged. If the essence of the Hon'ble Supreme Court judgement as cited above is brought into effect, the cost price of the property of the appellant must be compared with that of the market price of the property received in exchange. The difference in price between cost price and market price must be arrived at if asset is a capital asset. Computation of income charged under the heading 'capital gains' shall be computed in accordance with the provisions of section 48 of the Act. Accordingly, the Assessing Officer has computed the capital gain in terms of section 48 r.w.s. 50C of the Act. The computation of capital gain in the case of the assessee is further strengthened by the fact includes exchange of the asset. Therefore, the Assessing Officer is correct in adopting the difference between the sale consideration u/s. 50C and the indexed cost of acquisition as the taxable capital gains. Respectfully drawing the principle from the judgement of the Supreme Court in the case of Orient Trading Company Ltd., cited supra, the addition made of Rs. 3,26,75,007/- is hereby con....
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....the simple reason that exchange also includes in the definition of transfer as defined u/s. 2(14) of the Act. Once, the impugned transfer or sale of land in exchange comes within the definition of transfer as defined u/s. 2(14) of the Act, then capital gains arising out of transfer of said land needs to be computed in accordance with law by taking into account full value of consideration. In this case, the assessee had computed capital loss by taking into account market value of land transferred by him in exchange of market value of land received from other persons, and computed capital loss. The AO has computed long term capital gains by taking into account full value of consideration accruing as a result of transfer by applying provisions of section 50C and has adopted guideline value of the property as on the date of transfer. Further, the AO has allowed cost of acquisition in accordance with law and has arrived net capital gains in respect of both the properties. In our considered view, the method adopted by the AO is in accordance with law and does not called for any interference from our end. Hence, we uphold the computation of long term capital gains with regard to transfer ....