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2015 (3) TMI 8 - AT - Income TaxConversion of land - whether the land which was converted by the assessee into stock in trade (housing plots) is an agricultural land or not? - Held that:- The certificate issued by the village officer goes against the fact admitted by the assessee. Since the assessee itself admits that the land was converted into housing plots as on 19-09-2006 the same cannot remain as agricultural land for any longer. In other words, the purpose and usage of the land was converted into non agricultural land as on 19-06-2006 and part of the land was sold as on 27- 03-2007. Therefore, this Tribunal is of the considered opinion that when the assessee itself claims that the land was converted into non agricultural land as on 19-06-2006 it cannot continue as agricultural land any further. Therefore, the certificate said to be issued by the village officer has no relevance in view of the facts admitted by the assessee. Hence, there is no justification in the claim of the assessee that the land is an agricultural land. This Tribunal is of the considered opinion that the subject land is not an agricultural land. - Decided against assessee. Computation of capital gain - which is the year in which the capital gain has to be charged - year in which the conversion was made or the year in which the land was sold after the same was converted into stock-in-trade? - Held that:- In the case on hand, the assessee claims that only 188 cents of and was sold in the assessment year 2007-08. No material is available on record in respect of the year in which the remaining land was sold. Therefore, the assessing officer has to ascertain when the remaining portion of the land was actually sold after the same was converted into stock in trade. The capital gain shall be charged in the year in which the land was sold after conversion into stock in trade. Accordingly, the orders of the lower authorities to that extent is set aside and the issue of charging capital gain is remitted back to the file of the assessing officer to find out the assessment years in which the land was actually sold after the same was converted into stock in trade and bring the profit on conversion of the land into stock in trade to capital gain in the assessment years in which the land was actually sold. Apart from the capital gain, the profit on sale of the land after its conversion shall also be chargeable to tax as business income in the year in which the land was sold. Therefore, the assessing officer shall ascertain the year in which the land was sold and bring the profit on sale of land also as business. - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A r.w.r. 8D - Held that:- As rightly contended by the ld.DR, though Rule 8D was introduced in the statute book from assessment year 2008-09, the Income-tax Act does not permit for allowance of any expenditure on income which is not chargeable to tax. Therefore, irrespective of Rule 8D, this Tribunal is of the considered opinion that the assessee cannot claim any expenditure including interest on borrowed funds for earning the exempted income. Since the availability of the liquid funds needs to be verified, this Tribunal is of the considered opinion that the assessing officer has to examine the same in the light of the contentions raised by the assessee. Accordingly, the orders of the lower authorities are set aside and the issue is remitted back to the file of the assessing officer. The assessing officer shall reexamine the issue with regard to the availability of liquid funds for making investments for earning tax free income as also the other related expenditure incurred for earning exempted income in the light of contentions raised by the assessee before this Tribunal and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes.
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