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2015 (5) TMI 468 - AT - Income TaxLong term capital gain on sale of long term capital assets - chargeabilty to tax u/s. 45(2) - the assets received by the assessee at the time of partition are capital assets or stock-in-trade? - Held that:- From the above decision of the Tribunal in the assessee’s own case [2012 (6) TMI 56 - ITAT BANGALORE] it is seen that the assessee in block assessment proceedings claimed that all the properties held by him and the income arising therefrom belong to the joint family (HUF) and not to him in his individual capacity. The Tribunal after consideration of the material placed before it, held that the entire properties held by the assessee belonged to his joint family, as the same were ancestral in character and any purchase and sale of property was only by ploughing back the wealth obtained from the HUF nucleus. The assessee in his individual capacity did not have income from any source. The provisions of section 45(2) of the Act are attracted only when there is a conversion of a capital asset into stock-in-trade. As already observed by us, there is no material on record to support the view taken by the Assessing Officer that the assessee received certain capital assets on partition of the joint family which were later converted to stock-intrade by the assessee. A perusal of both the order of the Tribunal in the assessee’s case in the block assessment coupled with the Memorandum of Family Arrangements and Oral Partition dt.6.3.2004 clearly establishes that the erstwhile joint family of the assessee was carrying on real estate business and was holding several properties as stock-in-trade. These properties which were hitherto being held as stock-in-trade, were allotted to the assessee on partition. It is also evident that the assessee continued to carry on the said real estate business after the partition. In these circumstances, it is clear that, there is no conversion of capital assets to stock-in-trade either by the assessee or the joint family. In this view of the matter, we hold that the provision of section 45(2) of the Act are not applicable in the instant case and consequently the computation of capital gains made by the Assessing Officer is cancelled. From the ratio of the judgment of Kallooram Govindam v CIT [1965 (3) TMI 26 - SUPREME Court ] it is clear that the value of the properties fixed at the time of partition or determined aliunde would be the cost to be adopted in the hands of the recipient of the properties. However, the specific provisions of section 49(1) of the Act have been enacted in the Income Tax Act, 1961, to fix the cost of the capital asset acquired on partition to be the cost at which it was acquired by the previous owner. In other words, the judgment of the Hon'ble Apex Court would not be applicable in a case of capital assets received on partition in the light of the provisions of section 49(1) of the Act. However, since the provisions of section 49(1) of the Act, does not apply to other assets, viz. stock-in-trade etc., the ratio of the judgment of the Hon'ble Apex Court would be applicable and it is the cost at which the assessee acquired the property in the partition that has to be taken. Therefore, the judgment of the Hon'ble Apex Court would be squarely applicable to the facts of the instant case and the assessee is justified in adopting the said cost for computing income from business.Thus hold that the provisions of section 45(2) of the Act are not applicable to the facts of the case and therefore there cannot be any long term capital gain that can be brought to tax under those provisions for A.Ys. 2011-12 & 2012-13. - Decided in favour of assessee. Unexplained jewellery - Held that:- A specific query was put to the ld. counsel for the assessee as to whether any reconciliation was filed to highlight the difference between the amount offered as income and the report of the valuation. The ld. counsel for the assessee submitted that no such reconciliation was filed. In our view, when the quantum of jewellery found and the valuation is not disputed, the value as per the valuation report ought to have been offered as income on account of excess jewellery found. The valuation is done only as on the date of search. Therefore, the revenue authorities were justified in making the impugned addition. We, therefore, confirm the order of the CIT(Appeals) - Decided against assessee.
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