2026 (2) TMI 421

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....sessee was allotted land measuring 38212 sq mtrs. in Manesar by HSIIDC for development of majority IT/ITES space with a small percentage of residential and commercial space. After the start of construction in 2008, because of slow down in IT/ITES industry but the assessee had to construct the project due to the policy of HSIIDC that if the project is not completed at least 75% within two years, the allotment will be cancelled. 3. During the assessment year under consideration, the assessee completed some towers and left part of the building to be constructed in future. The assessee converted 50% of the land into stock in trade and continued to hold balance 50% into fixed assets. The fair market value on the date of conversion of land int....

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....rred an appeal before Ld. CIT(A) Delhi 31. Before Ld. CIT(A), assessee has submitted detailed submissions which is reproduced at Pages 4 to 8 of the appellate order. 7. After considering the submissions of the assessee Ld. CIT(A) observed that Assessing Officer had charged the capital gain to tax arising out of conversion of capital asset being land into stock in trade at the time of its sale u/s. 45(2) of the Act at a fair market value as calculated by him. However, while computing the business profit of the assessee arising out of the sale of stock in trade was converted, Assessing Officer has not taken the same fair market value of land was adopted for computing capital gains at the time of conversion of the said capital asset into st....

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....t value of the assets to arrive at capital gains but at the same time has adopted the book value of the assets to arrive at the business profit out of the sale of such assets as stock in trade. He observed that the provisions of Section 45(2) of the Act do not permit such an approach to be adopted. Accordingly, he deleted the principle addition made by the Assessing Officer. 9. Aggrieved, with the above order the revenue is in appeal before us raising following grounds of appeal:- 1. Whether the learned CIT(A) erred in deleting the addition of Rs. 7,34,80,130/- made by the Assessing Officer (AO) without considering the detailed facts and circumstances of the case. The CIT(A) ought to have set aside the matter to the AO for prope....

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....rted 50% of the land acquired by it from HSIIDC to construct Tower E and Tower D. Since the assessee has converted the above said land from capital asset to stock in trade and after completion of the construction, assessee has realised sale consideration of substantial portion of Tower E and Tower D and adopted the percentage completion method, accordingly, declared 90.6% and 93.3% respectively in Tower E and Tower D in its Profit and Loss account. Accordingly, it declared the profit during assessment proceedings. The Assessing Officer observed that since the assessee has converted the land as stock in trade and failed to adopt the provisions of Section 45(2) of the Act at the time of conversion. Accordingly, he reworked Long Term Capital G....