TaxTMI 
TaxTMI 
2002 (5) TMI 204
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.... was transferred from the investment account and converted into assessee's stock-in-trade during the accounting year ended on 31-3-1983. On conversion the market value of the land was estimated by a Chartered Valuer. As per his report, the value of the converted land as on 1-4-1982 was Rs. 27.29 lakh. A multi-storied building was constructed on the said land by the assessee. A portion of the building was transferred to United Bank of India by registered Deed of Conveyance during the accounting year ended on 31-3-1989 relevant to the assessment year 1989-90. 3. In the return of income the assessee had admitted the profit on the sale of building under the head 'Business" at Rs. 12,65,376. According to the Assessing Officer, provision of sections 45(2)/2(47)(iv) of the Act was introduced with effect from 1-4-1985. He was of the view that conversion of the land into stock-in-trade was a transfer within the meaning of section 2(47)(iv) of the Act. According to section 45(2) of the Act, the difference between the sale price and the market value of the land as on the date of conversion was assessable as business profit and the difference between such market value and the original cost ....
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....85 whereas the provision of section 2(47)(iv) had taken into effect from 1-4-1985. Therefore, such a conversion of capital asset into stock-in-trade was effected before 1-4-1985. Hence, it could not be held as transfer. However, learned CIT(A) while deciding the present issue held that on a reading of section 45(2), it was clear that emphasis is not on the date of transfer by way of conversion but on the date on which such stock-in-trade is sold or otherwise transferred. Admittedly, the stock-in-trade was sold in the present assessment year. Therefore, the capital gain is to be computed by the Assessing Officer in this assessment year. Apparently, contrary view was taken by learned CIT(A) in the present assessment year and in the earlier assessment year i.e., assessment year 1988-89. 5. It may be mentioned here that a part of the converted assets was sold in the earlier years and the issue came up before the Tribunal for the assessment year 1988-89 and the Tribunal held that both the business income and the capital gain should be charged in the assessment year in which the sale or transfer otherwise took place and for computation of capital gain, the matter was restored to the A....
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....o cover a case of conversion of an asset by the owner thereof into stock-in-trade. These provisions came into effect from 1-4-1985. Further, our attention was drawn to section 45(2) of the Act which also came into effect from 1-4-1985 by which the profits or gains arising from the transfer by way of conversion by the owner of the capital asset into stock-in-trade, 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. According to learned Departmental Representative, the object of the legislation of the section 45(2) is to be taken into account i.e., to charge the gain to tax when such stock-in-trade is sold or otherwise transferred. Only because conversion had taken place earlier to 1-4-1985 that cannot be a bar for charging capital gains tax when the asset, in fact, was transferred during the previous assessment year i.e., in the assessment year 1989-90. According to learned Departmental Representative the decisions of the Supreme Court in the case of Bai Shirinbai K. Kooka and in the case of Groz-Beckert Saboo Ltd. are not applicable in the present circumstances of the case because these cases re....
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....ection (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." 10. On a plain reading of the aforesaid section, it is clear that this provision was enacted for computing capital gains in respect of transfer of converted asset into stock-in-trade of a business. it has been provided therein that such profit arising from the transfer by way of conversion as stock-in-trade 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. 11. Section 45(2) starts with a non obstante clause. Therefore, the provision of section 45(2) supersedes all the other provisions. Under this subsection (2) of section 4....
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....statute is not retrospective because a part of the requisition for its action is drawn from a time antecedent to its passing." 13. This was a case of a gift of house property by the husband to the wife in 1954 and the income from this house property was sought to be assessed under sections 27 / 64(iii) of Income-tax Act, 1961 which came into effect from 1-4-1962. It was challenged on the ground that transfer was before the Act came under force and assessment of income from such property amounted to retrospective effect to transaction occurred much before the coming into force. It was rejected by the High Court by observing as under: "From the above observations there is no doubt that there is no question of giving retrospective effect to section 64(iii) or section 27 in the instant case. There is also no need for questioning the title or ownership of the spouse. The sections only provide for a principle of computation and taxing the income in the hands of the transferor." 14. We may usefully refer to the decision of the Supreme Court in the case of Philip John Plasket Thomas v. CIT [1963] 49 ITR 97. In this case the question as for assessment of income of wife from admissi....