TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 355
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....addition of Rs. 13,96,40,040/- disregarding the fact that the assessee had violated fundamental accounting principles by revaluing the land without routing the corresponding entries through the profit and loss account and without giving corresponding credits to the capital accounts of the partners, and without giving corresponding credits to the capital accounts of the partners, and as such, the book results were ex facie incorrect and misleading." "2. Whether on the facts and circumstances of the case the Ld.CIT(A) erred in deleting the addition of Rs. 13,96,40,040/- without asking the assessee to furnish the copies of the partner capital accounts and without verifying the facts claimed by the assessee." "3 Whether on the facts and circumstances of the case the Ld.CIT(A) has erred in granting the impugned relief based on sweeping generalized submissions of the assessee and without conducting such further inquiries that he ought to have made as his powers were coterminous with the powers of the Assessing Officer." 03. The assessee is also aggrieved with the appellate order and has raised cross objection in CO. No. 83/Mum/2023 raising the following grounds of appeal:- "1. The....
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....essing Officer found that the assessee has not offered any capital gains and therefore, the reasons were recorded by the learned Assessing Officer stating that he has reason to believe that income to the extent of Rs.13,96,40,040/- for A.Y. 2013-14 has escaped assessment. Accordingly, notice under Section 148 of the Income-tax Act, 1961 (the Act) was issued on 22 March 2018. 06. The assessee filed its return of income on 29 November 2018, reiterating the original return filed. On 30 November 2018, reasons were requested which were provided on 3 December 2018. The assessee filed objections on 5 December 2018, and 10 December 2018, which were rejected on 11 December 2018. Thus, the reassessment proceedings commenced. 07. The assessee was asked to submit the details concerning the introduction of land. The assessee submitted that the above land was introduced in the partnership firm in the year 2010 at nil cost. Subsequently, in A.Y. 2013-14, the partnership firm revalued the land. It was stated that neither the partnership firm has claimed a revalued amount as cost of land nor the partners have debited the account of the partnership firm with the said valuation and therefore, the q....
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....he facts of the case stating that the assessee introduced the land in the books of the partnership firm in A.Y. 2011-12. On that date, no sum was credited to the partner's account and similarly, no amount was debited as value of land in the books of the partnership firm. Subsequently, in A.Y. 2013-14, the sum of Rs.13.96 crores was credited to the account of the assessee by putting the valuation of the land. He referred to the provisions of Section 45(3) of the Act stating that when partners transfer the capital asset to the partnership firm as capital contribution or otherwise, such sum is capital gain, shall be chargeable to tax as his income of the previous year in which transfer takes place. Further, concerning the computation of capital gain, the amount recorded in the books of account of the firm as the value of the capital asset shall be deemed as the full value of the consideration on such transfer. Therefore, the amount credited to the account of the assessee of Rs.13.96 crores, is the full value consideration received for computation of capital gain. He submitted that this sum was credited in the A.Y. 2013-14 and therefore, the order of the learned Assessing Officer i....
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....r other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.] 014. As the year of chargeability as per section 45(3) is the "year in which transfer takes place". The AY in which transfer took place is AY 2011-12 and not the impugned Ay in which assessment is made. On this sole reason, the appeal of the ld AO fails. 015. Further Decision relied up on of ITAT by the ld CIT (A) has been upheld by Honourable High court Principal Commissioner of Income-tax, Kolkata-1 V Blue Heaven Griha Nirman (P.) Ltd.* [2022] 135 taxmann.com 3 (Calcutta)/[2022] 285 Taxman 663 [ SLP dismissed [2023] 154 taxmann.com 17 (SC)/[2023] 295 Taxman 11 (SC) holding as under :- "9. For the purpose of deciding w....
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..... The guideline value for the purpose of stamp duty as fixed by the Government at the relevant time was Rs. 260/- per sq. ft. and the purchase price paid by the three companies was Rs. 701/- per sq. ft. The total cost of the land paid by the three companies, inclusive of stamp duty and registration charges was Rs. 24,54,54,125/-. The land was purchased with a proposal to develop an industrial park and the three companies accounted for the said land so purchased as "work in progress" and reflected it under "Current Assets" in their balance sheet. 11. On 9-1-2006, these three companies and another company M/s. Wellgrowth Griha Nirman Private Limited. (the assessee in ITAT No. 239 of 2017) formed the partnership firm namely M/S. Salapuria Soft Zone and the three companies transferred the said land to the partnership firm. The fourth company (the assessee in ITAT No. 239 of 2017) was to arrange the finance required for development of the land. Each of the said three companies had 10% share in the profit/loss and the fourth company's share was 70%. The partnership business was deemed to have commenced from 1-4-2005. By supplementary deed of partnership dated 13-3-2006 between the ....
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....way of capital contribution when it was converted into fixed assets from inventory by the firm. The Assessing Officer held that section 45(3) was applicable in respect of such transfer made during the previous year relevant to the assessment year 2008-09. It was further held that the revaluation figure recorded in the books of accounts in the firm M/s. Salapuria Soft Zone as on March 31, 2008 was to be deemed as full value of consideration received or accruing as a result of transfer of the capital asset by way of capital contribution. Further the revaluation amount was the profit which accrued to the three companies (assessees before us) and each of them was liable to be taxed on one-third of such profit as short term capital gains. Further, the Assessing Officer pointed out that the land was grossly undervalued till it was part of inventory in the books of accounts of the firm to avoid the market value of the land being taken into consideration and consequently to avoid higher taxes on capital gains in the hands of the assessee company. 13. Thus, the Assessing Officer concluded that the revaluation amount was real profit and not notional and the firm was taxable in respect of i....
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....006 also accounted for it as "Current Asset". The partners transferred the said land at cost and there was no profit in the hands of the partners upon transfer of the said land to the firm. Therefore, it was contended that section 45(3) of the Act was inapplicable. It was further contended that after the firm received the land as the capital contribution, it was developed by infusing substantial funds during the financial year 2005-06 and thereafter. It was only on March 30, 2008 the firm converted the developed land including construction thereon as inventory into "fixed assets" and thereafter on March 31, 2008 revalued it with consequent credit to the partners' "Current Account". Further it was contended that section 45(3) of the Act did not come into operation for the assessment year 2008-09 and by reason of conversion of the developed land and building into fixed asset by the firm or due to revaluation by the firm of the asset so converted during the previous year ended March 31, 2008. Further it was pointed out that the section 45(3) of the Act is applicable in the year of transfer by the partner of his capital asset to the partnership firm by way of capital contribution a....
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....ccounting principles, the land held as inventory could only be shown at its costs. The revaluation of the asset by the firm was justified by contending that it was to bring it in line with the current market value of the land and building and for justifying the bank finance obtained by the firm to the tune of Rs. 250 crores. Thus, it was submitted that the revaluation was not the colourable device. Other factual details with regard to the loan availed by the firm were also placed for consideration. 15. The CIT(A) accepted the contention raised by the assessee. After examining the factual issues it specifically held that revaluation of an asset is not a business transaction resulting in any pecuniary gain which can form subject matter of taxation. Ultimately by a well reasoned order, the CIT(A) allowed the appeal filed by the assessee. Aggrieved by the same, the revenue preferred the appeal before the tribunal. The tribunal firstly considered the validity of the reopening of the assessment under section 147 of the Act. After elaborately considering the facts the tribunal held that, if at all any income accrues or arises owing to such revaluation, it is an issue which had to be dea....
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.... received or accruing to the partner as a result of the transfer of the capital asset to the firm. Thus, section 45(3) does not seek to substitute by any other figure the value agreed between the partners at which the asset is transferred by a partner to the firm. 16. With regard to the revaluation, tribunal re-appreciated the facts which were considered by the CITA. With regard to the development of the area in question, as to how there was steep rise in the value of the properties and the state government revised the guideline value for the purpose of stamp duty several times between 2004-07 and after noting the price rise the tribunal held notwithstanding the said fact in accordance with the accounting principles the land held as inventory was shown at its cost and therefore it cannot be said that under valuation was done by the assessee as alleged by the Assessing Officer. 17. Further more on facts the tribunal agreed with CIT(A) that after conversion of inventory into fixed asset the firm revalued the developed land including construction thereon in order to bring it in line with the current market value to justify the business assistance secured by the firm from the banks....