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2018 (8) TMI 2075 - AT - Income TaxAddition towards capital gains u/s 45(3) - profit accrued to assessee company on transfer/contribution of capital by way of contribution in the form of its share of ‘land asset’ to the ‘partnership firm’ - HELD THAT:- Notwithstanding such price rise, in accordance with accounting principles, the land held as inventory could only be shown at its cost. Hence there cannot be any undervaluation of land in the books of the assessee and other two partner companies of recording the value of land as alleged by the ld AO. We find that only after conversion of inventory into fixed assets that the said firm revalued the developed land including construction thereon in order to bring it in line with the current marked value and for justifying the bank finance of nearly ₹ 250 crores. Such revaluation was neither colourable nor a device. It is well settled that revaluation in the books of accounts of an asset which the assessee continues to own does not result in any profit or income. Revaluation at market value results in notional imaginary profit which cannot be taxed. Revaluation of an asset which an assessee continues to hold is not a taxable event and does not give rise to any taxable income. A person cannot make a profit from himself. We hold that the assessee had not derived any tax advantage pursuant to the revaluation of land in the said firm in Asst Year 2008-09. In any case, the revaluation, even if held to be taxable, could be examined only in Asst Year 2008-09 and it has got absolutely no bearing in Asst Year 2006-07. The assessee cannot be expected to preempt in Asst Year 2006-07, that the partnership firm would reconvert the stock in trade into capital asset and then revalue the same . Hence in any event, there is absolutely no scope for bringing any capital gains to tax in the Asst Year 2006-07 in the hands of the assessee partner. - Decided in favour of assessee
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