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2015 (7) TMI 48 - AT - Income TaxCapital gain accrued to the assessee on transfer of land - Land initially held as capital asset into stock-in-trade and later on flats constructed thereon under project development agreement were sold to different buyers - Held that:- As per project development agreement, the possession was given for construction/development of project with certain conditions stipulated in the agreement. Whatever amount was received, it was simply interest free advance to meet certain expenses to be borne by the assessee in order to discharge certain responsibilities conferred upon it through the agreement. The said advance would be refundable at different phases stipulated in the agreement. Therefore, in the light of judgment Chaturbhuj Dwarkadas Kapadia vs. CIT [2003 (2) TMI 62 - BOMBAY High Court] we are of the view that there was no transfer of possession of the land in favour of the developer, M/s Arif Industries Ltd. to attract provisions of section 2(47)(v) of the Act. Therefore, capital gain would only be chargeable in the years in which stock-in-trade would be sold. Therefore, we find ourselves in agreement with the order of the ld. CIT(A) who has rightly dealt with the issue. Accordingly we confirm the same. Cost of land as on 1.4.1981 adopted by the Assessing Officer for computing the capital gain accrued to the assessee on account of conversion of capital asset into stock-in-trade - Held that:- The fair market value determined by the registered valuer is not correct. On the other hand, the Assessing Officer has adopted the circle rate as on 1.4.1981 without looking to the fact that the assessee has filed the registered valuer’s report to determine the fair market value of the land as on 1.4.1981. We find force in the contention of the assessee that the Assessing Officer is not expert in the field of determining the value of land, therefore, he should have made reference to the DVO to determine the value of land as on 1.4.1981, but he did not do so. He adopted the circle rate as fair market value of land as on 1.4.1981 ignoring the registered valuer’s report submitted by the assessee and computed the long term capital gain. The approach adopted by the Assessing Officer does not appear to be correct. Since the market value of the land as on 1.4.1981 was not determined correctly either by the assessee or the Assessing Officer, this issue requires a fresh adjudication by the Assessing Officer. Accordingly, we set aside the order of the ld. CIT(A) in this regard and restore the matter to the file of the Assessing Officer with a direction to readjudicate the issue afresh after determining the fair market value of the land as on 1.4.1981. Since the assessee has filed the registered valuer’s report and disputed the circle rate, the Assessing Officer may make reference to the DVO in order to determine the fair market value of the land for the purpose of long term capital gain. - Decided in favour of assessee for statistical purposes. Disallowance made under section 14A - Held that:- Undisputedly, in the instant case, the Assessing Officer has not recorded any objective satisfaction with regard to the correctness of the accounts relating to dividend income of the assessee. He straightaway computed the disallowance as per provisions of section 14A of the Act read with per ruled 8D of the rules. Therefore, we are of the view that invocation of provisions of section 14A of the Act without recording an objective satisfaction is not proper, therefore, we set aside the order of the ld. CIT(A) in this regard and delete the addition of the disallowance made under section 14A of the Act. - Decided in favour of assessee.
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